(Bloomberg) -- Canada’s inflation rate dropped to its slowest pace in 10 months in November as gasoline prices plunged, easing pressure on the Bank of Canada to press ahead with interest rate increases.
The consumer price index recorded an annual pace of 1.7 percent in November, down from 2.4 percent in October, as gasoline prices recorded their biggest one-month drop in almost four years. Economists had forecast a 1.8 percent pace.
The data paint a benign picture for inflation for the Canadian economy, with little sign of underlying price pressures that would prompt more immediacy from the Bank of Canada.
Core measures of inflation -- seen as a better gauge of pressures -- nudged slightly lower in November, averaging 1.9 percent during the month. That’s down from 2 percent in October.
A 2 percent core rate is consistent with an economy at full capacity -- but not one that is overheating. Bank of Canada Governor Stephen Poloz reiterated as recently as this week that policy makers expect they will continue to move borrowing costs higher eventually in part because core inflation is near its 2 percent target. The Canadian central bank has raised interest rates five times since the middle of last year.
Investors aren’t pricing in the next increase until at least April.
The data Wednesday confirm the spike in consumer prices earlier this year, with inflation rising to a seven-year high of 3 percent in July, was transitory -- as the Bank of Canada had predicted at the time.
Gasoline prices, responsible for the spike, are now acting as a drag on the inflation index. They are down 5.4 percent from a year earlier.
Still, underlying inflation pressures remain stronger than they were earlier this year. Core measures have hovered around the 2 percent level since February, after averaging 1.5 percent in 2017.
In its most recent forecasts released in October, the central bank estimated inflation would average 2.3 percent in the fourth quarter.
Other CPI Highlights
- Monthly inflation was down 0.4 percent in November, in line with economist forecasts
- On a seasonally adjusted basis, inflation was also down 0.2 percent, the biggest one-month drop since May 2017
- Two of three measures of core inflation fell. The ‘common’ rate was unchanged at 1.9 percent, the ‘trim’ fell to 1.9 percent from 2.1 percent, and ‘median’ to 1.9 percent from 2 percent
- In addition to gasoline, the biggest drags on the consumer price index last month were travel costs and women’s clothing
- Fresh vegetables, up 8.4 percent in November, were the biggest upward contributors.