economic commentary

December 31, 2023 - Inflation Resumes Downward Trend

After peaking in June 2022, North American inflation has declined dramatically. Although there was a modest back-up during the summer months of this year, the downward trend has been re-established. Both Canadian and U.S. annual inflation now sit at 3.1%, after peaking at 8.1% and 9.1%, respectively, last year. Although the core inflation readings have declined as well, the data continues to remain higher than the headline rate. Core inflation is 3.5% in Canada and 4.0% in the U.S. This consistent downward trend has allowed central banks to refrain from increasing interest rates any further. Inflation declines in Europe have been even more impressive than in North America. U.K. inflation has declined from a peak of 11.1% to a current rate of 3.9%, while inflation in the Eurozone has declined from 10.6% to 2.4%. Despite these declines, however, inflation continues to be the main driver of financial markets as we begin 2024 as levels remain higher than the 2% target of most major central banks.

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