National Bank Says Best If Bank of Canada, StatsCan Use Consistent Seasonally Adjusted Methodology for CPI

11:18 AM EST, 01/21/2026 (MT Newswires) -- When the Canadian consumer price index was released on Monday, the market reaction was mixed in the face of puzzling results, said National Bank of Canada.

On the one hand, headline annual inflation came in well above consensus expectations, 2.4% year over year versus. 2.2% expected, noted the bank. On the other hand, the two core inflation measures tracked by Bloomberg pointed to more contained price pressures: CPI-Trim matched expectations at 2.7%, while CPI-Median came in two-tenths below consensus (2.5% vs. 2.7%).

Part of these discrepancies stems from differences in the seasonal-adjustment process, stated National Bank. For CPI-Trim and CPI-Median, Statistics Canada seasonally adjusts each sub-component and then aggregates them using the appropriate weights.

In contrast, for headline CPI, the agency seasonally adjusts only the main components but doesn't use these results when constructing the overall index, which is instead seasonally adjusted independently, pointed out National Bank. Statistics Canada justifies this approach by arguing that it filters out seasonal patterns more effectively, but the bank noted that it can also create frustrating inconsistencies.

In December, every seasonally adjusted sub-component grew at a slower pace than the overall index, an unprecedented intellectual impossibility, added National Bank. Had the agency used a bottom-up approach similar to that of the U.S. Bureau of Labor Statistics, seasonally adjusted monthly inflation would have been just 0.06%, instead of the official 0.30%.

The last time such a large gap between the two methods appeared was in 2009. While the Bank of Canada officially prioritizes CPI-Trim and CPI-Median as core measures, its recent communications indicate it is also monitoring inflation excluding food and energy, as well as CPI excluding the eight most volatile components.

The first two, which rely on the bottom-up method, rose only 0.07% on average in December (0.8% annualized), while the latter two, which are seasonally adjusted independently, grew 0.19% on average (2.3% annualized).

At a time when the BoC is reassessing which core inflation metrics to emphasize, it would be appropriate for both the BoC and Statistics Canada to align on a consistent seasonal-adjustment methodology. Maintaining the status quo makes it unnecessarily difficult to assess underlying inflation pressures, added National Bank.

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