Inflation holds at 3.1% in November as progress in tamping down price growth stalls

Canada's annual inflation rate was unchanged last month, holding steady at 3.1% as progress on tamping down price growth stalled.

The November consumer price index report released Tuesday (Dec. 19) from Statistics Canada shows higher prices for recreation and clothing put upward pressure on inflation.

Forecasters were widely expecting to see inflation tick down last month.

However, the report still had some encouraging elements, including a slowdown in some core inflation measures, which strip out volatile components.

"Today's moderately disappointing result drives home the point that we still have an inflation fight on our hands, in case there was really any doubt,'' wrote BMO chief economist Douglas Porter in a client note.

"Still, the bigger picture remains intact: The underlying inflation trend is lower, the economy is chilly, and the Bank is expected to begin trimming rates around mid-year."

The report also spelled some good news when it comes to groceries as the pace of price increases eased for a fifth consecutive month.

Grocery prices were up 4.7% from a year ago, marking a slowdown from 5.4% in October.

Prices for services were unchanged last month as higher prices for travel tours were offset by lower prices for cellphone services.

Earlier this month, the Bank of Canada opted to hold its key interest rate steady at 5% for the third consecutive time, largely because it has been encouraged by the slowdown in inflation and the economy this year.

But in a speech delivered by governor Tiff Macklem last week, he acknowledged there may be bumps along the way to returning inflation to the central bank's two per cent target.

Inflation in Canada has been steadily declining since mid-2022, but not without some hiccups, including an uptick in inflation during the summer.

The central bank has not ruled out the possibility of another rate hike, if it finds it necessary. But most forecasters anticipate its next move will be to cut interest rates sometime next year.