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Inflation hits 4.8% in December, rising at fastest pace in 30 years

Economists expect Bank of Canada to begin hiking overnight rate by spring
Gas prices were up more than 33% in December, according to Statistics Canada | Photo: On Fokus/Getty Images

Inflation showed no signs of abating in December, rising 4.8% on an annual basis to reach the fastest pace of growth in more than three decades.

Statistics Canada’s Consumer Price Index (CPI) revealed Wednesday that gas prices led the way last month, up 33.3% compared with a year earlier. That’s down from 43.6% in November.

Grocery prices, meanwhile, grew at a pace of 5.7% — a level not seen since November 2011.

Core CPI, which excludes more volatile categories such as gas and food, increased 3.4%.

“But much of the annual rise can still be attributed to lower prices in December [2020], when the pandemic weighed more heavily on consumer demand,” RBC economist Claire Fan said in a note.

“On a month over month basis, prices actually ticked 0.1% lower in December as Omicron concerns pushed oil and gasoline prices lower.”

In B.C., inflation grew 3.9% in December — the lowest rate among provinces after Saskatchewan (+3.5%) and down 0.1 percentage point from November.

“Still, make no mistake, inflation looks to have plentiful staying power, with oil prices on the march, firms reporting intense labour shortages and core inflation grinding up,” BMO chief economist Douglas Porter said in a note, referring to national figures. 

“Even with one of the ‘milder’ inflation rates in the G7, the stage is nevertheless set for the Bank of Canada to soon kick into tightening gear.”

He expects the central bank, which has not raised its overnight rate once throughout the course of the pandemic, to announce a rate hike in March.

Fan, meanwhile, believes this will happen in April.

"The process [hiking rates] is likely to begin this year but bringing inflation back to 2% is likely to be a multiyear project," TD senior economist James Marple said in a note.

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