Falling gas prices helped slow Canada’s inflation rate to 1.5 per cent

The slump in global oil prices has helped ease Canadian inflation.

Last month lower gas prices helped slow the annual inflation rate to 1.5 per cent, a 0.5 per cent drop from the month before.

Statistics Canada’s consumer price index revealed that gasoline prices in December were 16.6 per cent lower than the year before.

The data shows that the steep drop in oil prices is already having a substantial impact on the Canadian economy.

On Wednesday the Bank of Canada cut rates down to 0.75 per cent because of the effect low crude prices has had on the inflation rate.

The Bank of Canada expects inflation to fall below one per cent in 2015 and then climb back up to around two per cent in the second half of the year.

National Bank senior economist Krishen Rangasamy, referring to December’s “soft” inflation, told The Canadian Press:

“It supports the Bank of Canada’s decision this week to lower interest rates,”

The federal government also unexpectedly delayed its budget until at least April, a move to help it better assess the oil-price collapse’s effect on Canada.

The report, released on Friday, revealed that gas prices fell by 9.8 per cent (month-over-month) between November and December. Between June and December gas prices dropped 24.6 per cent.

 

Core inflation rate increased in December 

Canada’s core inflation rate, which excludes some volatile items such as gasoline, increased from 2.1 per cent in November to 2.2 per cent in December.

The Bank of Canada is aiming to keep core inflation as close as possible to its two per cent target.

The biggest year-over-year price increases included natural gas (up 16.5 per cent), meat (up 13.1 per cent), and cigarettes (up 11.4 per cent).

Manitoba was the only province in Canada where inflation increased

The only province to post an increase in inflation (on a year-over-year basis) was Manitoba, where inflation jumped from 1.1 per cent in November to 1.5 per cent in December.

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