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Eagerly anticipated inflation numbers for December — described by one economist as “the main event” this week — will be released by Statistics Canada on Jan. 16. After a series of unprecedented rate increases that peaked in July at five per cent, the Bank of Canada indicated it has likely hiked rates enough to tame inflation with markets now expecting cuts as soon as the second quarter of this year, with the consumer price index data supplying a critical piece to the puzzle.
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Here’s where some economists think the freshest inflation numbers will land.
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Jocelyn Paquet, National Bank of Canada
Paquet is forecasting that the 12-month rate will accelerate to 3.4 per cent, matching that of analysts surveyed by Bloomberg.
In November, the consumer price index accelerated 3.1 per cent year over year.
The National Bank economist doesn’t appear worried that the increase might mean inflation is on the rise again.
She and others on Bay Street have noted the expected inflation increase reflects “a highly negative base effect” as a significant decline in gasoline prices drops out of the year-over-year headline calculation, while at the same time outpacing gasoline price decreases from last month.
Looking to the numbers the Bank of Canada likes to track, Paquet is calling for its preferred measures of inflation — core median and core trim — to continue to ease, bolstering the bank’s arguments that it has hiked enough.
Nathan Janzen, Royal Bank of Canada
At Royal Bank of Canada, economist Nathan Janzen also expects headline inflation to accelerate to 3.4 per cent in December.
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“Still, the breadth and magnitude of inflation have continued to edge lower on balance,” he said in a preview note on Jan. 12.
Janzen estimated that the cost of mortgage interest accounts for approximately one-third of inflation excluding food and energy.
“The BoC will continue to look through price growth from that component because the increase is a direct result of earlier interest rate hikes,” he said, adding that increases in inflation have been running between one per cent and three per cent, which is in the Bank of Canada’s target range.
Desjardins Group is also forecasting that inflation reaccelerated to 3.4 per cent in December from last year.
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If the rate of inflation does pick up, it will come in at the fastest pace since September, Desjardins said, when the rate of growth in the CPI registered 3.8 per cent year over year.
Other data coming this week includes retail sales for December on Jan. 19. The Bank of Canada released on Jan. 15 fresh business and consumer outlook surveys for the fourth quarter showing that inflation expectations have started to cool.
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