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Canada’s main gauge of cost pressures eased in November, suggesting the Bank of Canada’s relentless campaign of interest-rate increases is starting to bite, thus opening the door for policymakers to pause in the new year.

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Statistics Canada reported Dec. 21 that the consumer price index increased 6.8 per cent from November 2021, down from year-over-year increases of 6.9 per cent in September and October, as the cost of gasoline and furniture fell.

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Grocery prices, rent and mortgage costs continued to exert the most upward pressure on the broader cost of living, Statistics Canada said.

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Various supplementary gauges showed “core” inflation, which strips volatile prices out of the headline calculation to get a better sense of the trend, was hovering around five per cent, little changed from the previous month.

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The headline number is still a long way from the Bank of Canada’s target of two per cent, which governor Tiff Macklem insists he will hit, no matter what. But it’s down from 8.1 per cent in June, suggesting the combination of lower commodity prices, a more fluid supply of goods and an unprecedented spike in policy interest rates are beginning to tame the most dangerous burst of inflation since the early 1980s.

“The headline has come down a bit, and that is some relief,” Macklem said in an interview on Dec. 19. The governor said various inflation measures likely will remain “uncomfortably high” for a few months, “but we get to the spring, snow melts, we expect to see the cumulative effect of our interest rates will really start to work and we should really start to see core (inflation) moving lower. If we start to see that, that will certainly be comforting.”

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The latest numbers fit with Macklem’s outlook for prices over the winter. A more meaningful drop in the year-over-year reading would have been preferable, but the number that policymakers are fighting to get back to two per cent was “a bit” lower for the fifth consecutive month.

Gasoline prices — a highly visible cost that often dictates individual perceptions of inflation — dropped 3.7 per cent from the previous month, after jumping 9.2 per cent in October from September. The monthly decreases slowed the year-over-year rate of increase to 13.7 per cent from 17.8 per cent in October, Statistics Canada said.

Unfortunately, the latest batch of inflation data also support Macklem’s sense that core price pressures will remain “uncomfortably high,” making it difficult to conclude that no more interest-rate increases will be needed to get inflation under control.

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Following the Bank of Canada’s lates half-point increase earlier this month, deputy governor Sharon Kozicki said to make “meaningful” progress towards the target, three-month rates of inflation will “need to come down further and be sustained.”

There wasn’t a lot of evidence of that in November. The three-month annualized rate of change of the consumer price index, minus food and energy, was 4.3 per cent, up from four per cent in October, according to Douglas Porter, chief economist at Bank of Montreal. At the same time, with the exception of food and energy, the three-month rate of most components of the index is lower than the headline rate, suggesting overall inflation will continue to moderate, said Charles St-Arnaud, chief economist at Alberta Central.

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However, that moderation might be happening too slowly, given inflation is at such a high level. Price pressures could stick, which might stoke expectations that the cost of living will keep getting more expensive. That would only reinforce inflation by prompting suppliers to charge more for goods and services and workers to demand higher wages.

“Inflationary pressures remain broad and sticky,” St-Arnaud said in a note to his clients. “With this in mind, the (consumer price index) report is likely to be a small disappointment for the Bank of Canada, which was likely hoping for a weakening in underlying inflationary pressures.”

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