Canadian Inflation pressures showing further signs of easing

  • Lower energy costs and slowing grocery price growth pushed headline CPI growth lower in October
  • Stripping out food and energy components, price growth is still ‘sticky’ but edged lower
  • Bank of Canada’s core measures are still above the 2% inflation target but continued to look better on a 3-month rolling average basis
  • Abnormally high Inflation is impacting a smaller share of products in the consumer basket

See previous versions:

  • Growth in BoC’s preferred inflation gauges slowed, but still surpassed the 2% target.
  • The latest BOS survey revealed that firms anticipated lower inflation than consumers in the near future.
  • Businesses’ wage growth expectations trended lower as labour markets cool.
  • Gasoline prices dipped down in September but still higher than the levels from a year ago.
  • Mortgage interest costs are still disproportionately adding to overall price growth.

  • Higher prices at the pump pushed Canadian headline inflation rate up.
  • Food costs are still high but growing at a slower pace.
  • Mortgage interest costs continue to drive a disproportionate share of headline price growth.
  • But the Bank of Canada’s preferred inflation measures also accelerated further above the 2% target.
  • The breadth of inflationary pressures remain wide in Canada.

  • The uptick in headline CPI was largely due to higher energy prices, but broader price pressures still above the BoC’s target range.
  • Recent month-over-month growth in ‘core’ measures showed signs of easing, but still stubbornly high.
  • The breadth of inflation is still wider than normal.
  • Food price growth still high but edging lower.
  • Mortgage interest costs continue to surge.

Canada’s headline inflation back in Bank of Canada’s target range

  • Lower gasoline prices continue to slow year-over-year growth in the consumer price index.
  • Broader inflation pressures are also weaker than a year ago—but most of the BoC’s key core measures have been ‘sticky’ at about 4%.
  • Businesses are planning smaller price increases in the year ahead. But these will still be larger and more frequent than in pre-pandemic times.
  • Consumers continue to expect high rental price growth over the next year. But their expectations for higher food, automobile, and gas prices are moderating.

June 27, 2023

  • Inflation pressures are increasingly driven by rising rents and mortgage interest costs.
  • Global drivers like commodity prices and supply chain disruptions continued to ease—and domestic pressures started to come down.
  • Ongoing moderation in supply chain pressures pushed raw material and industrial prices lower.
  • The Bank of Canada’s preferred core measures were at rates still well-above the 2% target.
  • Firms’ expectations on wage and inflation improved slightly in recent months, but remained at high levels.

May 16, 2023

  • Inflation pressures still lower than they were, but did not ease further in April
  • Growth in the Bank of Canada’s preferred core measures ticked up slightly on a 3-month rolling average basis
  • Grocery price growth slowing in both Canada and the U.S.
  • A slowdown in cost growth for rail and truck transportation have signaled further easing in supply chain pressures.
  • Travel costs remain high as demand persists.

April 18, 2023

  • The breadth of inflation pressures narrowed again in March.
  • Prices at the grocery store remained elevated but price growth may be past its peak.
  • Businesses expect input price growth will continue to slow.
  • Expectations for wage growth are also edging lower, with consumers expecting more modest increases than businesses plan to pay

March 21, 2023

  • Headline and core CPI continued to decelerate.
  • Moderation in the farm product price index foreshadow easing in food inflation.
  • Rent and mortgage interest still surging, offsetting slower inflation for home-buying expenses and travel costs.
  • Breadth of inflation pressure has stabilized but remains elevated compared to pre-pandemic period.

See update from February 21, 2023

February 21, 2023

  • The cooldown in Canadian inflation continued in January despite higher mortgage interest costs.
  • Growth in travel prices slowed after busy holiday season.
  • Domestically-driven inflation pressures remained as foreign-driven price pressures subsided.

See update from January 17, 2023

January 17, 2023

  • Headline CPI continued to retreat and pressures narrowed across goods and services
  • Shelter inflation still robust, as higher rent and mortgage costs more than offset falling home prices
  • More easing to come – businesses expected slower growth in input and output prices in year ahead
  • Inflation expectations stayed above 2% for most businesses for the next 2 years, but improved in the near term

See update from December 21, 2022

December 21, 2022

  • Inflation still running hot, but price pressures have narrowed
  • Travel inflation stalled before holidays after summer surge
  • Lower commodity prices will put a cap on goods inflation in 2023
  • Higher interest rates will cut into household purchasing power in 2023 and further ease inflation pressures

November 16, 2022

  • Headline CPI ticked higher as food and gas inflation accelerates
  • But broader measures of inflation pressures showing further evidence of easing
  • Gasoline prices still down from earlier this year but elevated diesel prices expected to add to production costs down the road
  • Costs for mortgage interest payments and motor vehicles will see more acceleration as home-buying related inflation slows
  • Price pressures still running above Bank of Canada target, but further signs of easing mean end of interest rate hiking cycle could be close

October 18, 2022

  • Headline CPI growth eased again in September on lower gasoline prices
  • Core inflation still running hot despite early tentative signs of easing in breadth of near-term price momentum
  • Lower price expectations from businesses not enough to prevent further aggressive BoC interest rate hikes


September 20, 2022

  • Headline CPI continued to slow in August with falling home and industrial prices flagging more declines to come
  • ‘Core’ measures also ticked lower, but are still exceptionally high
  • Services prices still surging on strong demand for travel and hospitality services
  • Inflation pressures still too broad to prevent further central bank rate hikes


August 16, 2022

  • Slowdown was led by a drop in gasoline prices, to still elevated levels above last year
  • Industrial prices cooled further, as supply chain challenges keep moderating
  • With more pullback in consumer spending expected ahead, inflation likely has peaked
  • Pressures still too broad to derail central bank from aggressive hiking path


July 20, 2022

  • Canadian inflation pressures continued to surge in June
  • Home prices have shifted from big tailwind to headwind for price growth
  • Industrial price growth edging lower as global supply chain disruptions show signs of easing
  • Markets are betting that aggressive central bank rate hikes will cool inflation pressures


June 22, 2022

  • Surging inflation is cutting into year-ahead GDP growth expectations.
  • Close to half of Canadian CPI growth fueled by global price pressures, with home buying costs adding to domestic growth.
  • Cooling housing market could bring some relief; although price pressure has also continued to broaden.
  • Wage growth should continue to accelerate, as labour shortage issues grow more acute.


May 18, 2022

  • Industrial input and output prices are still surging, keeping pressures broadly based
  • Grocery prices rising at fastest pace since the early 1980s
  • But central banks rate hikes are expected to slow demand
  • Home buying costs (accounting for ~20% of year-over-year CPI growth) will start to slow on lower housing demand


April 20, 2022

  • Higher headline inflation partly a result of rising gas prices after Russia invaded Ukraine
  • But price pressures continued to broaden
  • Geopolitical headwinds also adding pressure to business input costs
  • Inflation expectations remain elevated for the near-term, although anchored around 2% in longer-run


March 16, 2022

  • More goods and services seeing faster price growth.
  • Invasion driving commodity price volatility.
  • Market expects inflation to stay above 3% over 5 years.


February 16, 2022

  • Prices for commodities and industrial inputs continued to edge higher.
  • To-date, home and auto remain the biggest driver for price growth but pressure’s also broadening.
  • Strong household purchasing power will put a floor under consumer demand and inflation trends in the near-term.


January 19, 2022

  • Surging house prices underpinning higher shelter costs.
  • Share of goods/services seeing higher price growth continuing to broaden.
  • Wage growth to pick-up; recent gains more present for highly-skilled jobs.


December 15, 2021

  • Inflation pressure in Canada has been broadening, with more goods and services seeing above-target levels of price growth.
  • Energy commodity prices jolted on Omicron related concerns.
  • Wage pressures are building, although unevenly across industries.


November 17, 2021

  • Even excluding higher shelter costs, prices in Canada have bounced back above pre-pandemic trends.
  • Inflation pressure is broadening with more of the consumer basket seeing above-target rate of growth.
  • Inflation expectations, from market, businesses and consumers are still edging up.


October 20, 2021

  • Share of CPI basket seeing above-trend price increases from pre-pandemic levels still rising
  • Energy prices have increased; industrial input prices remain elevated
  • More businesses reported capacity issues related to shortages of inputs and supply chain disruptions in Q3


September 15, 2021

  • Shelter prices have surged but the pace of growth is now slowing
  • Motor vehicle production disruptions expected to keep vehicle prices high
  • Supply chain disruptions and increased services demand taking over as driver of price growth


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August 18, 2021

  • Headline CPI growth still impacted by ‘transitory’ factors but growth in industrial prices beginning to slow
  • Slower demand for homes will limit further gains in accommodation related expenses
  • Rising agriculture commodity prices and firming consumer demand to keep floor under price growth


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July 28, 2021

  • Cars and homes accounted for much of price growth in June
  • Investors are still betting that the inflation spike will prove temporary
  • Cooling commodity prices to temper soaring input costs


June 16, 2021

  • Consumer price increases were more broadly-based in May
  • Market inflation expectations plateau albeit at elevated levels
  • Rising input costs pose a key hurdle for businesses though some offset from stronger loonie


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May 20, 2021

  • Inflation pressure still manageable but broadening
  • Market expectations have dialed higher
  • Rising Input costs and firming demand to act as tailwinds for price growth


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Claire Fan is an economist at RBC. She focuses on macroeconomic trends and is responsible for projecting key indicators on GDP, labour markets as well as inflation for both Canada and the US.

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