• Notes from the Desk | CAD CPI - Stagflation Alert

Notes from the Desk | CAD CPI – Stagflation Alert Sept 19 2023

Notes From the Desk:  CAD CPI – Stagflation Alert


Rising unemployment and slower economic growth seem to have had little downward impact on prices.


The rise in headline inflation was fueled by higher gasoline prices, rents, and mortgage costs.  YoY food prices dropped to 6.9% from 8.5% in July, and travel-related costs such as airfare and hotel rates also showed weakness.


By the numbers.


  • YoY CPI: 4% (3.8% expected)
  • YoY CPI Trim:  3.9% (3.5% expected)
  • YoY CPI Median:  4.1% (4% expected)


The Implications.


The conundrum is how the Bank of Canada (BoC) will balance sticky inflation with rising unemployment and weaker economic growth.

The bond market has moved to price a 50% chance of a 25 bps hike in October, with yields rising 5 to 10 bps this morning.  We expect rates to remain volatile as traders change the odds of an October hike based on the incoming data.

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