Core Inflation Drops Again

Today’s Consumer Price Index numbers indicate that, while gasoline prices and mortgage-interest costs edged-up overall inflation in November, core inflation declined again. When it fell last month, some commentators responded that “one month does not make a trend.” However, as Statistics Canada itself noted, a fairly clear trend has emerged:

However, the Bank of Canada’s core index, used to monitor the inflation control target, rose only 1.6%, posting its slowest 12-month increase since April 2006.

The core index has decelerated since July 2007. The 12-month change was 2.2% in August, 2.0% in September and 1.8% in October.

The fact that core inflation is now in the bottom third of the Bank’s target range bolsters the case for lower interest rates.

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