Desjardins Says "Slightly Hotter-Than-Anticipated" Canadian CPI "Masks A Cooling in Underlying Inflationary Pressures

09:47 AM EST, 01/19/2026 (MT Newswires) -- A "slightly hotter-than-anticipated" headline Canadian CPI print for December "masks a cooling in underlying inflationary pressures", said Royce Mendes at Desjardins on Monday.

According to Mendes, Desjardins continues to believe inflationary pressures are "tame enough" for the Bank of Canada to place less weight on the upside risks to consumer prices. But, he added, the economy has held up well enough for central bankers to remain on the sidelines. He noted Government of Canada bond yields at the short end of the curve had drifted lower since Monday's release, "reflecting the underlying weakness in price growth".

Desjardins noted Canadian consumer prices fell just 0.2% month over month in December, in contrast to expectations for a 0.3% decline. While that meant the year over year rate rose to 2.4% from 2.2%, Mendes said the acceleration was driven by last year's sales tax break falling out of the calculation. In its writeup on Monday, he noted, Statistics Canada highlighted the various categories that put upward pressure on the 12-month rate, which were affected by the tax holiday.

As a result, Mendes also noted the slowing in the BoC's preferred core measures, which exclude changes in indirect taxes, provide even greater insight into the inflation trends late last year. The core median and trim indexes both inched up less than 0.1% month over month, while the average of the three-month annualized rates plunged to 1.66%, down sharply from 2.31% in November. That's the slowest pace since early 2024. Core services excluding shelter inflation prices were up 0.24% on the month, leaving the three-month annualized rate tracking 3.1%, down from 3.3%.

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