Due at 1330 , GMT, December CPI data from Canada

What are the banks looking for?

BMO:

Consumer prices likely fell 0.4% in December, in line with the average drop in the month over the past five years.

  • Gasoline prices pulled back, retracing a portion of the prior month's surge, while heating oil prices were up modestly.

December is seasonally the weakest month of the year for CPI, with prices falling in each of the past eight years except one.

  • Last year was among the stronger prints, with prices down just 0.2%, which, combined with this year's anticipated drop, is going to push yearly inflation down two ticks to 1.9%.

There are two potential factors we'll be watching for in this report.

First, wireless carriers introduced a limited-time low cost data plan, which (if picked up) could add some downward pressure to the headline.

Second, we'll be watching for price pressures in industries that will be impacted by Ontario's January 1st minimum wage hike. Anecdotal evidence suggests the food service industry has implemented steep price increases, though that may not show up until January and the industry has a small share of the basket.

The Bank of Canada's core CPI measures diverged in November with the trimmed mean and weighted median moving up a couple of ticks each, while the common component decelerated. We don't put too much weight on the latter since it tends to be more of a lagging indicator. We're expecting the core measures to hold steady, but see some upside risk in this report.

CIBC:

The Bank of Canada hiked, with on-target inflation being cited as one reason to justify higher rates. Although we're likely to stay near 2% in next week's report, the headline rate is likely to slip two ticks to 1.9% as a soft month for gasoline prices (-2.8% m/m) presents a modest drag.

  • Elsewhere in the consumption basket, prices could see another trend-like 0.2% SA gain in ex-food and energy prices.

After struggling through most of the year, recent months have seen a firmer path for core prices-something we will see more of in 2018 with wage increases creating some cost-push pressures.

Look for the common component measure of inflation to hold ground at 1.5% for December.

A higher average track for oil, less slack in the economy, and wage gains - some of which are coming from Ontario's new minimum wage laws - are all positives for the 2018 inflation outlook. Look for headline prices to average just over 2% this year, with core measures closing in on 2% as well