09:41 AM EST, 12/17/2024 (MT Newswires) -- Tuesday's flat reading in the Canadian consumer price index undershoots expectations for a 0.1% month-over-month increase and leaves the annual rate tracking 1.9%, one tick below both the consensus and last month's reading, noted Desjardins.

While food and energy prices rose in November, prices for cell phone services, furniture, children's clothing and toys all declined. The discounts were attributable to Black Friday sales, which may have been more pronounced this year as consumers had been cautious about spending heading into the holidays, said the bank.

Given the seasonal element in those price declines, the Bank of Canada would typically look to its preferred core measures of inflation to guide upcoming monetary policy decisions, stated Desjardins. However, these measures provided conflicting signals in November.

Both core-median and trimmed mean rose 0.3%, which pushed the average of the three-month annualized rates up to 3.3% from an upwardly revised 2.9% in October. That said, the increase in those measures partially reflects the inclusion of mortgage interest costs in the calculation in November, a category that had previously been excluded.

Given that mortgage-interest cost inflation has decelerated and will likely continue to do so now that the BoC has conducted a number of rate cuts, central bankers might want to look through that strength in their preferred measures, pointed out Desjardins.

Excluding shelter, core-median and trimmed mean were both up just 0.2%, with the average of the three-month annualized rates tracking 2.4%. While that suggests that there's no reason for Canada's central bank to panic, the three-month annualized rate of core services excluding shelter also remained at 3.3%. As a result, the BoC's guidance for more gradual rate cuts in 2025 remains intact, added the bank.

Desjardins continues to expect that the central bank will cut rates another 25bps in January, but it anticipates a pause in March. The bank's mid-year and end-of-year forecasts of 2.75% and 2.25% remain unchanged for 2025, given that the disinflationary pressures from mortgage renewals and slower population growth are likely to weigh on prices next year.