OTTAWA Dec 22 Canada's annual inflation rate
cooled in November, suggesting the Bank of Canada will maintain
its cautious stance and keeping alive the possibility of another
rate cut as new measures of underlying inflation also fell short
of the central bank's target.
Separate data from Statistics Canada on Thursday showed
October retail sales rose more than expected, boding well for
economic growth at the start of the fourth quarter.
But economists were focused on the inflation figures that
showed the annual rate decreased to 1.2 percent from October's
1.5 percent, short of forecasts for 1.4 percent.
Three new measures of core inflation were slightly more
robust but still below the bank's 2 percent target. Economists
said the possibility of another rate cut could not be ruled out,
although most expect the bank to stay on the sidelines until
That is in contrast to the U.S. Federal Reserve, which
raised rates earlier this month.
"It will just reinforce the Bank (of Canada's) message that
they have zero interest in following the Fed higher," said Doug
Porter, chief economist at BMO Capital Markets.
"In fact, I think it will keep a flicker of doubt out there
that the bank could even consider cutting rates, in an extreme
The Canadian dollar weakened against the greenback following
Food prices fell 0.7 percent from a year ago as consumers
paid less for meat and fresh fruit and vegetables. A decrease in
prices for clothing and gasoline also contributed to slower
Among the core measures the bank established when it renewed
its inflation target in October, CPI median was the closest to
target, up 1.9 percent compared to the year before. The measure
shows the median inflation rate across CPI components.
CPI trim, which excludes upside and downside outliers, was
at 1.6 percent.
CPI common, which measures common price changes across
categories in the CPI basket, was the coolest at 1.3 percent.
The bank has said the common gauge has the best correlation to
the output gap.
Economists have said that using three core measures instead
of one could make it difficult to determine what the bank will
Retail sales rose 1.1 percent in October as consumers bought
more at general stores, although they paid more for gasoline.
The report suggested the economy may have started the fourth
quarter on better footing, though growth is expected to slow
compared to the third quarter.
(Additional reporting by Allison Martell in Toronto; Editing by