Canadian CPI and Core CPI both exceeded analyst expectations for the month of November, Statistics Canada reported on Friday December 19th.

Core CPI increased by 0.7% MoM while the Consumer Price Index posted a drop of 0.3% over the same period. Expectations had been for a 0.2% drop in the Core number and a much sharper 0.7% fall in all-items consumer prices.

Despite the better than expected inflationary figures, the annual rate of inflation for the CPI all-items fell to 2.0% from 2.6% in October. A figure of 1.6% had been predicted. However, the closely watched Core CPI increased to 2.4% from 1.7% in the previous month. A slight decrease to 1.5% had been expected.

Core consumer prices is the BOC’s preferred indicator when considering interest rates and the sharp increase may complicate the Bank’s aggressive rate easing cycle. However, the need to stimulate the economy in the face of global recession is likely to take priority over inflationary worries. The BOC’s Overnight Rate currently stands at 1.50% after a cut of 75 basis points on December 9th.

Canadian Consumer Price Index followed the example set by the US earlier in the week and dropped sharply in October. Statistics Canada reported a 1.0% MoM fall in the headline number while the Core CPI also dropped, off by 0.2%.

The fall in CPI represents the largest decline in almost 50 years. This brings the YoY rate down to 2.6%. In September the yearly rate stood at 3.4 percent. Core CPI remained at 1.7%, below the 1.9% that had been expected.

The largest contributing factor to the fall in consumer prices was gasoline. On a monthly basis prices fell by 13.4%. This represents the sharpest decline since June 1959. However, they remain 13.3% higher on the year, down from 26.5% in the previous month.

Food prices continue to gain momentum, up 6.1% for the 12 months ending in October after the 5.6% increase in September.

Today’s data is likely to have little effect on the BOC’s monetary Policy decisions. The Bank has made it perfectly clear that it intends to cut interest rates, with a move highly likely at the December 9th meeting. The BOC expects consumer inflation to fall to below 1 percent in 2009.