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Persistent Underlying Inflationary Pressures Will Keep Bank of Canada Away From Hiking Rates, Says National Bank

BY MT Newswires | ECONOMIC | 12/15/25 01:42 PM EST

01:42 PM EST, 12/15/2025 (MT Newswires) -- The Canadian inflation print in November was generally more moderate than consensus expectations, with the overall consumer price index posting annual growth of 2.2%, while the median consensus among economists was 2.3%, said National Bank of Canada.

This doesn't mean that monthly price growth was weak, as the 0.24% increase in the index seasonally adjusted (SA) compared with October represents an annualized rate of 2.9%, noted the bank. Specific components contributed to this price surge, notably food, clothing, and healthcare spending.

The good news in Monday's CPI report is that these increases aren't widespread, as evidenced by core inflation measures, which recorded average annualized monthly increases of 1.6%, stated National Bank. But this moderation follows sharp increases in previous months.

Over three months, the average inflation rate for core inflation measures stands at 2.5%, a level that continues to cause discomfort for the Bank of Canada, which is targeting 2.0%, pointed out the bank.

The same observation applies when National Bank analyzes the number of components that have grown at a rate above 2.0% in the last three months, which stands at 34, compared with an average of 27 from 1999 to 2019.

All in all, the November CPI report is unlikely to change the BoC's view that the policy rate is at an appropriate level, added the bank. BoC considers this to be the level necessary for inflation to return to target in the long term, and progress has been made in this direction for core inflation measures.

This should reassure the BoC that, despite a so far surprisingly resilient economy, there is no need to consider raising interest rates in the short term, especially since tariff uncertainty continues to hold back the Canadian economy, according to National Bank.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.

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