economic commentary
December 31, 2024 - Inflationary Pressure Subsides, Core Still Elevated
Significant progress was made on the inflation front during 2024. Despite periods of uneven movement during the year, the latest Canadian CPI reading came in at 1.9%, below the 2.0% target of the Bank of Canada. Inflation in the U.S. still has more work to do in order to get to the target level as it currently sits at 2.7%. Inflation levels in the Eurozone and the United Kingdom have improved as well, with the latest readings at 2.2% and 2.6%, respectively. These levels have declined significantly from the peak levels that were reached in 2022, which ranged from 8.1% to 11.1%. Core inflation, which is a key indicator for global central banks, has remained elevated, however, with further improvement required in order to give central bankers more comfort that inflation has been tamed. Inflation has been the main focus of global financial markets over the past several years and was the prime factor contributing to the swift and dramatic increase in interest rates that occurred following the COVID pandemic. The improvement made on the inflation front has allowed central banks to focus on other factors impacting monetary policy, particularly the state of labour markets, which have exhibited some weakness over the past year.
