-Douglas Porter, Bank of Montreal chief economist
Inflation rate in Canada fell to the lowest level in more than a year in January, as plunging oil prices continue to impact consumer prices. According to Statistics Canada, January inflation slid to 1% from a year earlier, the level last time seen in November 2013, following the 1.5% reading in the prior month. Measured on a monthly basis, CPI dropped 0.2% from December. The sharp decline was led by a precipitous fall in gasoline prices, which plummeted 12.4% on month, and 26.9% on year. Nevertheless, the core inflation rate, which irons out eight volatile components of total CPI including gasoline and other fuels, remained unchanged at 2.2%, reinforcing the view that the energy price slump still does not impact the country's broader inflation picture.
After reaching a peak at 2.4% in October, Canada's inflation rate has been falling rapidly, driven by the sharp plunge in the price of crude. However, the core inflation rate, which is considered a better gauge of broader inflationary pressures, has remained relatively steady at slightly over the Bank of Canada's inflation goal of 2%. Economists suggested that the depreciation of the Canadian Dollar in the wake of dramatic oil's decline might be feeding broader inflation and cushioning the impact of slumping fuel prices, by increasing the cost of imported goods.
© Dukascopy Bank SA