Canadian headline inflation decelerates modestly in December

Canadian headline inflation slowed in the month of December. Consumer prices slowed modestly from November’s 2.1 percent to 1.9 percent year-on-year in December. On a sequential basis, consumer prices rose 0.2 percent.

Price growth was broad based, with seven out of major categories witnessing rises. Telephone services drove household operations, furnishings and equipment costs lower, down 0.3 percent year-on-year, likely a reflection of discounted wireless service plans offered in the month, noted TD Economics. Energy prices dropped sequentially, leading year-on-year price growth to 4.5 percent, from 7.6 percent in the earlier month.

The Bank of Canada’s preferred measures of core inflation rose again. CPI-common rose slightly to 1.6 percent year-on-year, with a matching rise in CPI-trim, to 1.9 percent. CPI-median was unchanged at 1.9 percent.

Looking at the energy-led deceleration in inflation, hot growth of the Canadian economy last year now seems turning into slightly hotter price growth.

“The Bank of Canada will likely take comfort both in that the growth-inflation nexus remains intact, and in their decision to increase the key policy rate to 1.25 percent earlier this month”, stated TD Economics.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollars was neutral 16.6178, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -100.914. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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