IM-Kronick and Ambler_2024_0313.pub

The Bank of Canada’s preferred core measures are CPI-trim (excluding the most volatile items) and CPI-median (focusing on the price change at the 50th percentile). [...] However, an alternative measure of core inflation known as CPIX, which strips out eight of the most volatile components and excludes the effects of indirect taxes, was only 2.4 percent in January, year-over-year, and just 1.6 percent at an annualized rate over the past three months. [...] In part, this is because the Federal Reserve may not be as close to cutting rates as the Bank of Canada. [...] But, with the economy teetering, core inflation should continue to fall, and expectations that the Bank will get inflation back to 2 percent will firmly re-anchor. [...] Kronick is Associate Vice President, and Director of the Centre on Financial and Monetary Policy at the C.