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The Bank of Canada's Tiff Macklem walks outside the building in Ottawa.BLAIR GABLE/Reuters

The Bank of Canada signalled earlier this month that it’s looking for an exit from its dizzying interest-rate-hiking cycle. Wednesday’s inflation report is not it.

The Consumer Price Index (CPI) data for November delivered little to guide the central bank toward its next decision on interest rates, scheduled for late January. The figures – headlined by a tiny decline in the overall year-over-year inflation rate, to 6.8 per cent from October’s 6.9 per cent – were good enough to give hope and disappointing enough to foment doubt.

The dip in the inflation rate was, at least, in the right direction, though it was smaller than economists had expected. Month-over-month price growth slowed. Prices for durable goods – the big-ticket items that typically rely on borrowing – declined in November and are down over the past several months, evidence that the Bank of Canada’s steep interest-rate hikes are weighing on the most rate-sensitive components of consumer spending.

Still, inflation has looked awfully sticky over the past few months – and is hardly crumbling under the pressure of the central bank’s all-out interest-rate attack. The November rate is down a scant two-10ths of a percentage point since August. The central bank’s core inflation readings – designed to filter out month-to-month volatility and home in on the price pressures across the broad economy – have actually inched higher.

One asterisk in the CPI data that the central bank’s policy-makers have to consider is how much of the stickiness in the inflation rate has come directly from its own interest-rate hikes. The year-over-year increase in mortgage interest costs was a staggering 14.5 per cent in November. Mortgage interest costs alone contributed nearly one-half of a percentage point to the overall inflation rate; as recently as June (when total inflation peaked at 8.1 per cent), those costs were actually down year over year. If you set aside those Bank of Canada-induced mortgage increases, the downward momentum in inflation looks a fair bit more pronounced.

Nevertheless, if Governor Tiff Macklem and his colleagues on the bank’s governing council had to make their next rate decision based on these unhelpful November data, they would almost certainly decide to err on the side of at least one more rate increase.

Mr. Macklem has indicated over the past week or so that he’s still more worried about not doing enough than he is about doing too much. Frankly, it’s hard to find anything in these numbers that says one more hike would be too much.

But the bank’s policy setters don’t have to make their January rate decision based on this inflation report. Not even close. They still have a month’s worth of economic data to chew on before then – including another inflation report (for December), which lands on Jan. 17, exactly one week before the next rate announcement.

Economists are already pencilling in a more significant drop in the overall inflation rate for December, if for no other reason than gasoline prices. Gasoline makes up more than 4 per cent of the Consumer Price Index, and is down about 12 per cent month over month, according to daily pump-price tracker Kalibrate. The current price is now about the same as it was a year ago; that’s a big swing from November, when gasoline was up nearly 14 per cent from a year earlier. The drop in pump prices alone could shave more than half a percentage point off the year-over-year inflation rate.

Still, a fall in pump prices alone won’t be very convincing to the bank. It would need to see a slowdown in core inflation measures – which will exclude this big gasoline drop – in order to be swayed meaningfully toward holding its policy rate steady. Mr. Macklem and his team will also look to the employment and gross domestic product reports for evidence that the key made-in-Canada pressures fuelling inflation – labour shortages and overheated demand – are letting up.

Regardless, what might prove critical to the January decision will be the information it has in hand that’s not from any Statistics Canada report. The bank’s quarterly business and consumer surveys will be published on Jan. 16, just nine days before the rate setting. While the key economic indicators are, by their nature, backward looking, the surveys cast their eyes forward; they provide a sense of how households and companies will adjust their expectations and behaviours in the coming months, in response to inflation and interest rates.

The insights from those surveys could be more useful than the set of economic numbers that appear to have gone into a halting, uneven transition. They could guide whether the downturn in inflation is headed into a long, slow drift – and, therefore, perhaps, in need of a further nudge from interest rates – or whether we’re in a temporary lull before inflation’s bubble finally bursts.

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