5. 7 percent, from 6 percent in november and a peak of 6. 6 percent in september. over the past three months, core cpi inflation has run at an annualized rate of 3. 1 percent, a noticeable drop from earlier in 2022. another encouraging sign is that higher inflation was less concentrated - the share of categories of different goods and services with inflation over 3 percent has declined in the past several months, from almost three fourths in early 2022 to less than one half in december. that's good news because it indicates that broader inflationary pressure across the economy is easing. now, here's why i am cautious about these latest results and why i am not ready yet to substantially alter my outlook for inflation. month - over - month core cpi inflation actually ticked up in december from november and is pretty much where it was in october and where it was in march when we began raising interest rates. although inflation measured over 12 months has been falling, december's reading is still close to where it was a year ago. core inflation was 6 percent year over year ( yoy ) in january 2022 and was 5. 7 percent yoy last month. thus, it basically moved sideways all year. so, while it is possible to take a month or three months of data and paint a rosy picture, i caution against doing so. the shorter the trend, the larger the grain of salt when swallowing a story about the future. back in 2021, we saw three consecutive months of relatively low readings of core inflation before it jumped back up. we do not want to be head - faked. i will be looking for the recent improvement in headline and core inflation to continue. wages, as i indicated earlier, are another stream of data that i will be watching for evidence of continued progress to help ease overall inflation. though recent hourly earnings data are a positive development, i need to see more evidence of wage moderation to sustainable levels. the federal reserve bank of atlanta's wage growth tracker has been running higher lately and has moderated less. the employment cost index for december won't be out until the end of this month. over time, we need to see wages grow more in line with productivity growth plus 2 percentage points, consistent with the fomc's inflation target. those are reasons that i am cautious about the recent good news, but it is good news. we have made progress. six months ago, when inflation was escalating and

we also have benefited from robust political, legal and economic institutions, and from openness to trade, investment and immigration. despite those advantages, developing the appropriate policies to maintain solid potential output growth in the face of an aging population is a formidable challenge. moreover, even the most effective policies can take some time to have a meaningful impact. that said, i ’ d like to touch on three policy areas that have been successful at promoting potential output growth in the past : education — i have benefited from the opportunity created by my own access, and my parents ’ commitment, to good - quality education at all levels ; immigration — which is something i know a bit about since my parents arrived in canada from europe during the 1950s ; and trade liberalization — which i have studied and analyzed for my entire professional life. education as alfred marshall — a founder of neoclassical economics — emphasized more than a century ago, education is critical to economic progress. xix in a period of accelerating technological change, boosting skills and the flexibility of the labour supply may be as important for potential output growth as the size of the workforce. xx improvements to education and training will help make workers more productive, which should in turn boost their employers ’ overall productivity and lift the economy ’ s potential. in marshall ’ s era, the main impediment to the quality of the labour force was illiteracy. this was a huge obstacle to lifelong learning and self - improvement. the vast majority of canadians, of course, can read and have basic numeracy skills. but this wasn ’ t always the case. our economy ’ s transition around the turn of the 20th century from agriculture to industry was facilitated by promoting public and private investment in education that provided broader access. the question today is whether education and training can equip a growing share of the workforce with the right skills for an increasingly technology - driven economy. while the challenge today may seem more daunting, it also appeared insurmountable in marshall ’ s time. yet, the expected private and social returns were great, so investment followed. history needs to be repeated. new technologies should be harnessed to provide broad access to the types of education and training that will help canadians prosper amid rapid change. this would also help to address rising income inequality, much of which is due to technological change that favours those with greater skills. xxi immigration higher immigration levels offer an obvious avenue for boosting potential by increasing the supply of labour, given that immigration