Canada’s November inflation data could soften the dovish tone from the Bank of Canada’s recent interest rate deliberations, economists warned Wednesday.
The Bank of Canada on Wednesday released a summary of its deliberations leading up to its Dec. 6 interest rate decision. According to the note, the central bank’s board concluded at its meeting that “recent data points in the right direction” and said the likelihood of further rate hikes has decreased.
This marks a shift in the Bank of Canada’s dovish tone, but the deliberations took place before Statistics Canada released its latest inflation data, with November’s consumer price index expected to be higher than most economists expected. It was shown that the decline was not as it had been in previous years, but rather stable at 3.1%. .
Eric Lascelles, chief economist at RBC Global Asset Management, said the new inflation data could prompt the Bank of Canada to reconsider its policy.
“This is the antithesis to all the dovish talk, because inflation has gone up,” he said in a television interview on BNN Bloomberg on Wednesday.
“It appears that at least some of that violent inflation was at least clearly temporary.”
November figures showed that travel partially offset the slowdown in growth. Mr Lascelles said given the typical fluctuations in the travel industry, it could mean that inflation was not as persistent as the numbers suggested, but cautioned that more research was needed.
“It’s fair to say there are some unanswered questions on the inflation front, and we’re not looking at a 2% (range) number with any certainty at this point,” he said.
December inflation data is scheduled to be released on January 16th, and the next Bank of Canada interest rate decision is scheduled for January 24th.
