The Canadian Bureau of Statistics will release the Consumer Price Index (CPI) data for December at 13:30 GMT on Tuesday, January 16th. As the release time approaches, the following are predictions from economists and researchers from the five major banks regarding the upcoming Canadian inflation data.

The overall inflation rate is expected to rise from 3.1% in November to 3.3%. If that's the case, this will be the first acceleration since August, reaching the highest point since September and further exceeding the 2% target. The core marginal inflation rate is expected to slightly decrease to 3.4% year-on-year, while the core median inflation rate is also expected to slightly decrease to 3.3% year-on-year.

Daoming Securities

Due to the base effect in 2022 offsetting the 0.4% decrease in the current month, we expect the overall CPI inflation rate to rebound by 0.2 percentage points in December, reaching 3.3% year-on-year. According to our forecast, the core inflation rate will further slow down, and the CPI deflator/median will decrease by 0.1-0.2 percentage points, keeping the average month on month inflation rate at 3.3%, even if these indicators remain strong on a 3-month annualized basis. Even if the overall CPI is slightly lower than the Bank of Canada's forecast for the fourth quarter, we believe that the Bank of Canada still needs to see more evidence of cooling inflationary pressures before abandoning the threat of further interest rate hikes.

Royal Bank of Canada Economics Research Department

The overall CPI growth rate in Canada is expected to slightly increase from 3.1% in November (a year-on-year increase of 3.4%), but the growth is mainly due to the "base effect" of energy prices, as the significant drop in gasoline prices a year ago is not within the calculation range of year-on-year growth. The year-on-year growth rate of the median and core consumer price index, which is preferred by the Bank of Canada, should not change much in December, while the annualized growth rate of the past three months that the Bank has been monitoring is more likely to slightly increase (with growth rates of 2.3% and 2.6% in November, respectively). Except for food and energy products, the increase in mortgage interest costs accounts for approximately one-third of the total price increase. The Bank of Canada will continue to monitor this portion of price growth as it is a direct result of earlier interest rate hikes, and excluding this portion, price growth has been operating within the inflation target range of 1% to 3%.

NBF

The decrease in gasoline prices may translate into -0.3% of the total data before seasonal adjustments. Nevertheless, the 12 month inflation rate may still rise from 3.1% to 3.4%, reflecting a highly negative base effect. Contrary to the overall index, the core index preferred by the Bank of Canada should slow down, with the median Consumer Price Index possibly dropping from 3.4% to 3.3% and the Small Consumer Price Index dropping from 3.5% to 3.4%.

Citibank

We expect the monthly CPI rate to decrease by 0.2% in December, as prices typically decline at the end of the year on a non seasonal basis. This will include a decrease in energy prices. However, the service prices should be mixed. But the most important factor in the monthly CPI report will be the core inflation indicator. The annual data for the next few months is expected to further decline, which is consistent with the trend of survey data such as the CFIB price plan. But the speed of three months is most important for the policy of the Bank of Canada, as Bank of Canada officials need to see a three-month core inflation rate trend of around 2.5% for at least 3-4 months in order to confidently lower interest rates. The November data shows that the core inflation rate for three months was 2.5%, but the "base effect" indicates an upward risk in December. The recovery of core inflation rate in the past three months may delay market expectations for a comprehensive interest rate cut by the Bank of Canada before April (after this data release, only two more CPI reports will be available before the April meeting).

Imperial Commercial Bank of Canada

The annual inflation rate in December may slightly accelerate, although this is mainly due to the smaller decrease in gasoline prices compared to the same period in 2022. In other aspects, rental and mortgage interest costs will continue to drive up housing prices rapidly, although there should be further signs that food price inflation is easing. The ticket prices in November are not as weak as usual, which may mean that the ticket prices in December will not increase significantly as usual. As the foundation of overall inflationary pressure becomes less widespread, we should see a further slowdown in the preferred indicators of inflation by the Bank of Canada, the Consumer Price Index (CPI trim) and the Consumer Price Index (CPI median).