Canada released their inflation report for December 2022 this morning. With inflation on everyone’s mind, here are two charts that help describe what has happened and what I think will happen.
First, the headline CPI came in at a still high looking 6.3% on a yoy basis but was slightly better than survery of economists were predicting. This is lower than the peak in June/22 at 8.13%. At face value, it looks like there is still a way to go.
But if we look at inflation through the Bank of Canada’s trim and median measurements, and we take the last three months and annualize them, we get a much different picture (see chart below). This equates to an annualized rate of only 2.5% – almost at the Bank of Canada’s target of 2%. And if the trend in monthly reports continues to come in “low” or “negative”, and as we start taking those higher monthly numbers off from the peak of June/22, we should see cpi continue to drop precipitously.
