Canada recorded an increase of 3.4 percent in the annual inflation rate during December

Canada has registered an increase in the annual inflation rate of 3.4 percent during December, which was 3.1 percent in November.

The data comes as the Bank of Canada is set to make an interest rate decision next week. Statistics Canada says inflation accelerated last month due to increases in gas and grocery prices. Prices at grocery stores rose 4.7 percent last month, the same pace seen in November. However, the agency said inflation has declined year-on-year, excluding gasoline.

Economists said the December inflation data was in line with their estimates and expected the central bank to keep the policy rate at 5 percent at its January 24 interest rate announcement. Meanwhile, money markets and economists expect the Bank of Canada to start cutting rates in the first half of 2024.

There may be a reduction of 25 basis points i.e. 0.25 percent in April. However, the Central Bank has also kept the avenues open for further hike in rates in case of rising inflation.