Skip to main content

Economy Canada’s annual inflation rate drops to 1.7 per cent on lower gas prices

Lower gas prices pulled Canada’s annual inflation rate in November down to 1.7 per cent, the first time in 10 months it has been below the Bank of Canada’s 2-per-cent target, underscoring market expectations that imminent interest-rate hikes are off the table.

Analysts in a Reuters poll had forecast the annual rate would fall to 1.8 per cent from 2.4 per cent in October. November’s rate matched the 1.7 per cent seen in January, 2018.

The Bank of Canada, which has raised rates five times since July, 2017, as the economy strengthened, said earlier this month that economic data heading into the fourth quarter had been weaker than expected.

Story continues below advertisement

“There’s absolutely no rush for the bank and probably the earliest we’re going to hear from them is in the springtime, in terms of rate hikes,” said Doug Porter, chief economist at BMO Capital Markets.

The central bank, which had predicted lower gas prices would pull down the annual rate, is due to announce its next interest rate decision on Jan. 9 and markets expect no change.

Statistics Canada said on Wednesday that gasoline prices fell by 5.4 per cent from November, 2017, on lower crude prices and overall energy costs dropped by 1.3 per cent over the same period. In both cases, it was the first year-over-year decline since June, 2017.

It also noted that the Bank of Canada’s three core inflation measurements came in at 1.9 per cent, the first time they have all been below 2 per cent since June, 2018.

“That informs a near-term dovish Bank of Canada. No hike in the first quarter (of 2019), probably returning to a hike in April is still our call,” said Derek Holt, vice president of capital markets economics at Scotiabank.

The Canadian dollar pared its gains on the news, touching $1.3446 to the U.S. dollar, or 74.37 U.S. cents.

The drop in the overall annual rate was the sharpest in absolute terms since May, 2012, when lower gas prices pulled it down to 1.2 per cent from 2 per cent in April.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter