Bank of Canada to Appreciate Moderation in November Core CPI But Food Price Increase Re-Emerge, Says BMO

11:06 AM EST, 12/15/2025 (MT Newswires) -- Canadian consumer prices rose 0.1% month over month in November, or 0.2% in seasonally adjusted (SA) terms, a bit lower than expected and mild enough to hold the annual inflation rate steady at 2.2%, said Bank of Montreal (BMO).

The main core inflation rates all took a step down in the month, with the Bank of Canada's two measures both chilling two ticks to 2.8% year over year, and both up just 0.1% month-over-month in SA terms. Excluding food and energy, prices also rose just 0.1% month over month, cutting the annual rate three ticks to a moderate 2.4% year-over-year pace.

The results may not be quite as good as advertised, however, as the measures of inflation's breadth took a step higher -- just over half of the elements of core prices are up by 3% or more, stated the bank. Still, anytime the overall reading is a bit below consensus and core takes a step back, BMO will put a check mark in the "good news" column this month.

There isn't much debate over where the major underlying problem remains for inflation -- food prices, pointed out the bank. Even in SA terms, overall food costs rose a "hefty" 0.9% month over month in November. Aside from the GST-holiday distortions earlier this year, that's the largest monthly increase in nearly three years.

Grocery prices alone are now up 4.7% year over year, a two-year high. It's no bargain eating out either, as restaurant prices are up 3.5% year over year. To put the impact of rising grocery costs in perspective, the overall inflation rate excluding food is a "mild" 1.85% year over year. Meat, coffee, sugar/chocolate and now fruit prices are the biggest drivers of this renewed upswing in grocery price inflation.

Acting as a bit of a counterweight, shelter costs -- the earlier inflation villain -- continue to moderate.

The good news is that, with this modest increase, inflation will average just over 2% for all of 2025, down from 2.4% last year and the lowest annual tally in five years, added the bank. The less-good news is that this moderation was in large part thanks to the removal of the consumer carbon tax, which alone lopped about half a point from the annual average.

BMO suspects that without that helping hand after March 2026, next year's average inflation rate will be closer to 2.5%, with food applying the main pressure.

A relatively clean inflation read to finish off a messy year, according to the bank. The BoC will be heartened by the moderation in the main core measures, but headline inflation is still coming in a bit above its expectation for Q4 -- it had penciled in an average of 2.0%, while it will likely be 2.2%. The clear culprit here is the re-emergence of grocery price inflation.

While the BoC's policies can do precious little about that, the reality is that rising food prices can make a big impact on inflation expectations, which Canada's central bank cares about a great deal, said BMO.

Overall, though, the calming core metrics would fit with the view that the BoC will be comfortable on the sidelines for some time yet.

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