Look for November inflation to fall into Bank of Canada's target range, economists say

Fresh data to be released on Tuesday

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Another piece of the interest rate puzzle drops this week when Statistics Canada releases inflation data for November on Dec. 19.

Economists surveyed by Bloomberg are forecasting that consumer price index growth will decelerate to 2.8 per cent year over year from 3.1 per cent in October.

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That would be just the second time since March 2021 that the reading has fallen within the Bank of Canada’s one- to three-per-cent target range for inflation.

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“The two-per-cent inflation target is now in sight. And while we’re not there yet, the conditions increasingly appear to be in place to get us there,” Bank of Canada governor Tiff Macklem said in a speech Friday.

Here’s what economists expect from this week’s inflation numbers:

Carrie Freestone and Nathan Janzen, RBC Economics

November inflation prediction: 2.9 per cent

RBC expects headline inflation to cool, reflecting the drop in gas and food prices.

They forecast core inflation, which excludes food and energy, to remain unchanged at 3.4 per cent year over year due to the rising cost of shelter.

“More than a third of the rise in ex-food and energy prices in Canada as of October came from mortgage interest costs as higher interest rates continue to flow through to household debt payments with a lag,” they said in a note.

The two measures of inflation the Bank of Canada favours should also cool “extending improvements seen in the prior month,” they said.

Randall Bartlett, Desjardins

Inflation prediction: 2.8 per cent

“Falling energy prices and the removal of the carbon tax from some household heating bills helped ease price pressures,” the bank’s senior director of Canadian economics said in a note. “Prices excluding food and energy tend to be seasonally weak in November,” which is why economists are calling for monthly inflation to fall by 0.2 per cent.

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Shelter costs are now the main driver of inflation, with consumer price index growth already sitting at two per cent when energy, food and shelter costs are excluded, he said.

“We’ve argued that the Bank of Canada should look at inflation excluding shelter to determine when to lower the policy rate,” he said.

November inflation chart

Robert Kavcic, Bank of Montreal

Inflation prediction: 2.9 per cent

BMO expects a slowdown in prices for food and gasoline to help temper consumers’ inflation expectations. “(That’s) exactly what policymakers want to see,” Kavcic said.

The BMO economist also thinks the Bank of Canada’s core inflation measures will fall to 3.5 per cent, their lowest level since mid-2021.

“Overall, we’re likely to see decent progress toward the two per cent target; not enough for the Bank of Canada to turn dovish, but a step in that direction.”

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Avery Shenfeld, CIBC Economics

Inflation prediction: 3 per cent

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CIBC’s chief economist is bucking consensus and predicting headline inflation of three per cent year over year.

“The Bank of Canada’s core measures are likely to continue their creep lower,” Shenfeld said.

He also expects inflation to be “bounced around” in the coming year as the price of gasoline gyrates but that a “further cooling in core measures will be key to our call for a first rate cut in Q2.”

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