Latest figures reinforced expectations without resolving lingering questions
The Bank of Canada is expected to hold its policy rate steady for an extended period following November’s inflation data, which showed core price pressures easing even as the headline rate remained unchanged.
The overall consumer price index (CPI) held firm at 2.2% last month, according to Statistics Canada, remaining well within the central bank’s target range. The Bank of Canada’s preferred measures of core inflation eased to an average of 2.8%, marking the lowest level since January 2025.
Core inflation shows mixed signals
Both CPI-trim and CPI-median declined to 2.8% in November. The analysis noted that various measures of core inflation now sit below 3%, with CPI excluding food and energy at 2.4% and CPI excluding the eight most volatile components at 2.9%.
“There is nothing in today’s report that would raise the BoC’s level of concern regarding inflation,” Servus Credit Union chief economist Charles St-Arnaud said on Monday. “Headline inflation is close to the mid-point of the inflation target, while various measures suggest underlying inflation is slightly below 3%.”
However, the breadth of inflationary pressures rose slightly in November. The share of CPI components increasing by more than 3% reached 43%, the highest since January 2024. The share of components rising by more than 5% remained unchanged at 21%, the highest since February 2024.
Food and shelter drive price changes
Food price inflation climbed to 4.2% year over year, the highest level since December 2023, adding 0.7 percentage points to overall inflation. Beef prices surged 17.7% year over year, while coffee prices jumped 27.8%.
Shelter cost inflation eased to 2.3%, the lowest since March 2021, contributing 0.7 percentage points to headline inflation. The decline reflected slower price increases in rents and owned accommodation.
Transportation costs rose 0.7% year over year, adding just 0.1 percentage points to inflation. Gasoline prices fell 7.8% from a year earlier, but higher costs for leasing or purchasing passenger vehicles offset the decline.
Provincial variations emerge
Inflation rates varied across provinces in November. Manitoba recorded the highest rate at 3.3%, followed by Quebec at 3.0% and New Brunswick at 2.7%. Prince Edward Island reported the lowest rate at 1.4%, while Alberta and Ontario both registered 1.9%.
In Alberta, inflation rose slightly to 1.9% in November. Food prices increased 4.3% year over year, while energy costs fell 12.9%. Core inflation in Alberta eased to 2.5%, only marginally above the national measure.
Momentum shows slight uptick
The three-month annualized change in headline CPI reached 3.2% in November, suggesting inflation momentum increased slightly. Half of the main CPI components posted three-month annualized changes above 3%.
Momentum in the Bank of Canada’s core measures eased to 2.3% in November, the slowest pace since August 2025. Five of the eight major CPI components showed momentum above 3%.
St-Arnaud said underlying inflation is likely to remain sticky around current levels in the months ahead, but nothing in the report is expected to influence monetary policy in the short term.
“With this in mind, we continue to think that the BoC will keep its policy rate unchanged for an extended period,” he said.
