Softer than expected consumer price index (CPI) data for December reinforced expectations that the Bank of Canada will likely delay monetary tightening until the second quarter or perhaps even later.
Consumer prices rose 2.4% in the 12 months to December, following the 2.0% increase posted in November. The 0.4 percentage point gain was mainly a result of higher gasoline prices. Economists had actually expected all-items CPI to rise by 2.5% on annual basis after a 2.0% increase in November.
Prices increased in seven of the eight major components of the CPI in the 12 months to December. The only exception was clothing and footwear.
The mortgage interest cost index, which measures the change in the interest portion of payments on outstanding mortgage debt, declined 2.5% in the 12 months to December, after falling 2.7% in November.
In Alberta, prices rose 0.8%, following a 0.1% increase in November. Gasoline prices in Alberta rose 10.2% in December, after increasing 0.3% in November. Prices for homeowners’ home and mortgage insurance were also up.
The consumer price index is a major inflation indicator. The Canadian banks pay special attention to the index data while defining their interest rates, increasing the rates as the index value grows.
To have a look at more of the Stats Canada data, click here.
It seems that the prime mortgage rate will remain stable at least until the summer of 2011 and perhaps even longer – so, is the variable the right choice for you? Contact one of our licensed mortgage brokers to figure it out!