Inflation makes the cost of doing business more expensive and inhibits investment, which is why the recent data from Statistics Canada is welcome news.
The Consumer Price Index rose 6.3% year over year in December, down from a 6.8% increase in November. Excluding food and energy, prices rose 5.3% on a yearly basis in December, compared to 5.4% in November.
Canadian Chamber Economist Mahmoud Khairy said the drop might not be enough to keep the Bank of Canada from one more increase to interest rates later this month. Khairy expects rates to rise by a quarter point, to 4.5%, and end the tightening cycle which began last March.
Meanwhile, the Bank of Canada released its latest Business Outlook Survey on Monday. It found that the rise in interest has dampened sales forecasts as customers have less spending money available after paying for necessities. The Bank also released its survey of Consumer Expectations on Monday, showing that many people still fear a recession despite stronger than expected job numbers.