Notes From The Desk: Canadian Inflation – A Glimmer of Hope
Canadian inflation slowed in August, with headline CPI coming in at 7% (7.3% expected) as lower gasoline prices offset rising food costs.
The closely watched average of the three core measures also slowed from 5.4% to 5.2%.
Today’s data reinforces the market expectation that Canadian overnight rates need not go much higher than the 3.75-4% range, which allows short-end yields to drop a bit.
Furthermore, with the cross-border divergence in inflation and employment trends, the terminal rate in Canada is likely to be lower than in the US.