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January 2023 Consumer Price Index: Steady progress as inflation continues to slow

It was another month of progress in the Bank of Canada’s fight against inflation, as Canada’s headline Consumer Price Index (CPI) inflation grew at a slower pace of 5.9% year-over-year in January, which was better than the market expectation of 6.2%.

It was another step in the right direction as the January CPI data show inflation is slowly coming back under control. Both headline and core inflation declined to 5.9% and 5.1% year-over-year, respectively. The decline was broad-based; however, food prices and rising mortgage rates remain problem areas. While this is welcome news on the heels of the Bank of Canada’s pause in January, inflation remains well above target.

Given stronger-than-expected job numbers, resilient household spending and further rate increases planned in the United States, the door is not completely closed on another Bank of Canada rate hike in March, but it remains unlikely.

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