Homeowners and new home buyers might have to wait a little longer for mortgage rate relief after inflation numbers came in higher than expected.Statistics Canada reported Tuesday that consumer prices ticked up to 3.4% in December, up from 3.1% in November and reversing a downward trend over the second half of the year.Although StatsCan partly attributed the increase to a so-called ‘base-year’ effect where gasoline prices fell more year-over-year in December of 2022 when they were down 13.1% compared to 7.7% this year. On a monthly basis, gas prices were down about 4.4%, the fourth consecutive month of declines..Even so, other core measures rose higher, casting doubt on the Bank of Canada’s official 2% target rate. The bank will be making its first interest announcement of the year next week and is expected to hold rates steady at 5%.Manitoba was the only province to see lower inflation numbers. Alberta’s came in at 3% while Saskatchewan’s was 2.7%..However, analysts said the timing of any future rate cuts will be determined by how fast inflation falls and how sharply the broader economy contracts."If you are looking for data to signal a rate cut is imminent, this isn't it. December's inflation report underscores that the last mile of getting inflation all the way back to 2% is the hardest," wrote Leslie Preston, a managing director and senior economist at TD.Despite threats from the federal government to pressure food retailers to lower prices, grocery prices were up 4.7% in December following a similar increase the month prior.Month-over-month, Canadians paid 31.1% more for air transportation in December amid strong demand for air travel during the holiday season, following a 1.1% gain in November. .Housing and shelter continues to be a concern after rent prices continued to climb in December, rising 7.7% year over year, following a 7.4% increase in November. Among other factors, StatsCan noted a higher interest rate environment, which can create barriers to homeownership, put upward pressure on rents. In that regard, mortgage inflation was at 28.6%, due to higher interest rates — but off a peak of 31% in August.“Shelter inflation continues to account for a disproportionate share of price growth as past interest rate increases continue to pass through to mortgage costs with a lag,” said Claire Fan, an economist with RBC.While rent prices remained elevated on a year-over-year basis in most provinces in December, prices in Ontario (+6.9%), British Columbia (+8.6%) and Quebec (+6.8%) contributed the most to the increase..“We continue to expect the BoC to tread cautiously and watch the data carefully, but for further slowing inflation to allow a pivot to interest rate cuts around mid-year,”RBC.Passenger vehicles rose 2.3% on a year-over-year basis in December, following a 1.5% increase in November. The increase was led by higher car prices (+3.4%), partly attributable to the availability of new 2024 model-year vehicles.The bottom line?“We continue to expect the BoC to tread cautiously and watch the data carefully, but for further slowing inflation to allow a pivot to interest rate cuts around mid-year,” Fan said.
Homeowners and new home buyers might have to wait a little longer for mortgage rate relief after inflation numbers came in higher than expected.Statistics Canada reported Tuesday that consumer prices ticked up to 3.4% in December, up from 3.1% in November and reversing a downward trend over the second half of the year.Although StatsCan partly attributed the increase to a so-called ‘base-year’ effect where gasoline prices fell more year-over-year in December of 2022 when they were down 13.1% compared to 7.7% this year. On a monthly basis, gas prices were down about 4.4%, the fourth consecutive month of declines..Even so, other core measures rose higher, casting doubt on the Bank of Canada’s official 2% target rate. The bank will be making its first interest announcement of the year next week and is expected to hold rates steady at 5%.Manitoba was the only province to see lower inflation numbers. Alberta’s came in at 3% while Saskatchewan’s was 2.7%..However, analysts said the timing of any future rate cuts will be determined by how fast inflation falls and how sharply the broader economy contracts."If you are looking for data to signal a rate cut is imminent, this isn't it. December's inflation report underscores that the last mile of getting inflation all the way back to 2% is the hardest," wrote Leslie Preston, a managing director and senior economist at TD.Despite threats from the federal government to pressure food retailers to lower prices, grocery prices were up 4.7% in December following a similar increase the month prior.Month-over-month, Canadians paid 31.1% more for air transportation in December amid strong demand for air travel during the holiday season, following a 1.1% gain in November. .Housing and shelter continues to be a concern after rent prices continued to climb in December, rising 7.7% year over year, following a 7.4% increase in November. Among other factors, StatsCan noted a higher interest rate environment, which can create barriers to homeownership, put upward pressure on rents. In that regard, mortgage inflation was at 28.6%, due to higher interest rates — but off a peak of 31% in August.“Shelter inflation continues to account for a disproportionate share of price growth as past interest rate increases continue to pass through to mortgage costs with a lag,” said Claire Fan, an economist with RBC.While rent prices remained elevated on a year-over-year basis in most provinces in December, prices in Ontario (+6.9%), British Columbia (+8.6%) and Quebec (+6.8%) contributed the most to the increase..“We continue to expect the BoC to tread cautiously and watch the data carefully, but for further slowing inflation to allow a pivot to interest rate cuts around mid-year,”RBC.Passenger vehicles rose 2.3% on a year-over-year basis in December, following a 1.5% increase in November. The increase was led by higher car prices (+3.4%), partly attributable to the availability of new 2024 model-year vehicles.The bottom line?“We continue to expect the BoC to tread cautiously and watch the data carefully, but for further slowing inflation to allow a pivot to interest rate cuts around mid-year,” Fan said.
