A couple of snippet previews of the inflation data due from Canada at 0830 Eastern time.
TD expect
- headline CPI inflation to firm by 0.2pp to 3.3% YoY in December as base effects from 2022 more than offset a 0.4% decline on the month.
- Our forecast would also see core inflation rates ease further with a 0.1-0.2pp decline for CPI-trim/median, leaving the average at 3.3% YoY, even as these measures firm on a 3m annualized basis.
And on Bank of Canada implications:
- Even with headline CPI printing slightly below Bank of Canada projections for Q4, we believe the Bank still needs to see additional evidence of cooling inflation pressures before it drops the threat of further hikes.
RBC expect:
- Canadian headline CPI growth is expected to tick slightly higher (+3.4% YoY) from November’s 3.1% increase, but with the gain largely coming from energy price ‘base-effects’ as a large drop in gasoline prices a year ago falls out of the YoY growth calculation.
- YoY growth in the BoC’s preferred median and trim ‘core’ CPI measures should be little changed in December, and the more recent three-month annualized growth rate that the central bank has been watching is more likely to tick a touch higher (from 2.3% and 2.6%, respectively, growth rates in November.)
- Still, the breadth and magnitude of inflation have continued to edge lower on balance. Growth in mortgage interest costs is accounting for roughly a third of total price growth excluding food and energy products.
And on Bank of Canada implications:
- The BoC will continue to look through price growth from that component because the increase is a direct result of earlier interest rate hikes, and price increases excluding that component have been running within the 1% to 3% inflation target range.
more to come
