Prices showed 'little sign' of a substantial annual uptick in January
January’s inflation figures offered a much less alarming outlook than initially anticipated, as the headline rate dropped slightly to 2.9% from 3.4% in December.
According to BMO chief economist Douglas Porter, this greater-than-expected change to the CPI could signal the potential for interest rate cuts in the near future, beginning in June.
“We remain comfortable with our call that the Bank will begin trimming in June,” he said.
Porter explained that January often sets the tone for inflationary trends for the rest of the year, but said there was “little sign” of substantial uptick in prices during the month.
He pointed to furniture and appliance prices as an example, stating that while both categories did see monthly increases, they still recorded year-over-year declines.
Similarly, January saw reductions in clothing and footwear prices. Grocery store prices also had a less pronounced increase than expected, dropping to 3.4% year over year compared to 4.7% in the previous month.
Despite the positive signs, Porter did note that the Bank of Canada will likely remain cautious as a result of persistent concerns over strong wage gains, firm service prices, and core inflation rates that continue to exceed 3%.
He also highlighted how shelter costs bucked the downward trend seen in consumer goods prices, with rent experiencing a slight uptick to 7% annually. Meanwhile, mortgage interest costs remained the primary driver for inflation at 27.4% year-on-year, which is just a slight change from 28.6% in December.
What are your thoughts on this story? Feel free to comment below.
