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21 Sep 2015
Canada: No pressure on BoC for further easing - ING
FXStreet (Delhi) – James Knightley, Senior Economist at ING, suggests that the recent inflation figures of Canada are consistent with BoC targets, and as a result there will be no alteration to the Bank of Canada’s policy stance in the next monetary policy meeting in October.
Key Quotes
“Canadian annual inflation was in-line with consensus forecasts at 1.3% YoY, remaining unchanged from July’s figure as well as a slight rise in the MoM figure by 0.2%.”
“The effect of continuing lower energy prices have been offset this month by higher consumer food prices (3.6%) and clothing and footwear (2.1%). The consequences of a weakening CAD over the summer months has led to the re-pricing of consumer items and prices increased in seven out of the eight components of Canadian CPI.”
“Consequently, this month’s core CPI figure dropped a sizeable 0.3ppt from last month, leaving annual inflation at 2.1%. This is well within the Bank of Canada’s expectations to hit a figure of 2.0% in 3Q15 (MPR July-15). However, since the start of September-15, there has been a 4.1% fall in Brent crude prices, thus external and domestic risks (such as a larger decline in investment in the oil and gas sector) are still to show up in Canada’s headline inflation.”
“Moreover, the proximity to the upcoming elections may make policymakers reticent to act. We therefore expect that they will hold rates at 50bp in the near-term, which is backed by the OIS implied probability of a 25bp cut being only 7.6%.”
Key Quotes
“Canadian annual inflation was in-line with consensus forecasts at 1.3% YoY, remaining unchanged from July’s figure as well as a slight rise in the MoM figure by 0.2%.”
“The effect of continuing lower energy prices have been offset this month by higher consumer food prices (3.6%) and clothing and footwear (2.1%). The consequences of a weakening CAD over the summer months has led to the re-pricing of consumer items and prices increased in seven out of the eight components of Canadian CPI.”
“Consequently, this month’s core CPI figure dropped a sizeable 0.3ppt from last month, leaving annual inflation at 2.1%. This is well within the Bank of Canada’s expectations to hit a figure of 2.0% in 3Q15 (MPR July-15). However, since the start of September-15, there has been a 4.1% fall in Brent crude prices, thus external and domestic risks (such as a larger decline in investment in the oil and gas sector) are still to show up in Canada’s headline inflation.”
“Moreover, the proximity to the upcoming elections may make policymakers reticent to act. We therefore expect that they will hold rates at 50bp in the near-term, which is backed by the OIS implied probability of a 25bp cut being only 7.6%.”