The small fall in headline inflation to 1.8% in December is not as encouraging as it looks, with the details suggesting that a higher proportion of the GST holiday was captured by the price surveys than we had expected. The Bank’s preferred CPI-trim and CPI-median core measures, which adjust for tax changes, again rose by 0.3% on average and the three-month annualised rate accelerated to 3.5%. Were it not for the threat of US tariffs hanging over the economy, it would be easy for the Bank of Canada to justify a pause at its meeting next week.
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