Two things to watch ahead of the Bank of Canada’s next rate decision

Two important readings come out early this week ahead of the Bank of Canada‘s interest rate decision on Jan. 25.

Earlier this month a strong jobs report tilted the odds in favour of the central bank hiking its rate by another 25 basis points to 4.5 per cent.

But December’s inflation data on Jan. 17 and the Bank’s Business Outlook Survey out Jan. 16 “could make the decision a closer call,” say RBC economists Nathan Janzen and Claire Fan.

RBC expects headline Consumer Price Index growth to slow to 6.4 per cent in December from 6.8 per cent in November. Inflation peaked at 8.1 per cent last June.

Grocery price growth, which surged 11.4 per cent year over year in November, should slow in 2023 as supply chain disruptions ease further and lower agriculture commodity prices feed through, the economists said. Moreover, gas prices fell 13 per cent in December from the month before.