08:33 AM EST, 01/22/2025 (MT Newswires) -- Tuesday's Canadian inflation report for December showed a rather unusual combination: prices did fall significantly in non-seasonally adjusted terms, while the year-on-year rate was a tenth lower than expected, said Commerzbank.

What was unusual was that the price increase was quite strong at 0.24% seasonally adjusted and month-on-month, which is also above the rate consistent with the inflation target, wrote the bank in a note to clients.

As a consequence, it's worth looking at the underlying data, even for countries where inflation is now at an acceptable level, stated Commerzbank.

For the Bank of Canada (BoC), the figures are likely to be another reason to slow the pace of rate cuts, added Commerzbank. It's likely that only one or two more 25bps cuts will follow.

This is supported not only by the fact that inflation has picked up somewhat recently but also by the slight improvement in the performance of the real economy -- which is presumably beginning to show the positive effects of the rate cuts -- and the great uncertainty surrounding the new United States Trump Administration (see also the first article, pointed out the bank.

As a consequence, Commerzbank believes that Canada's central bank will cut rates by another 25bps next Wednesday, but will also signal that the rate cuts are coming to an end.