The Bank of Canada (BoC) is walking a fine line between inflation and growth concerns. Today’s CPI data ought to make them a touch more comfortable that inflation is not accelerating.
The Numbers.
- Headline CPI 1.7% (1.8% expected)
- Gasoline, clothing, and air transport prices were tamer
- Rents rose 0.6% MoM (which is at odds with the anecdotal information in news stories)
- Core median CPI 3.1% (3.1% expected)
- Core trim CPI 3.0% (3.1% expected)
Implications.
Today’s data opens the door for a cut in September, but ultimately, the BoC’s decision does not hang in the balance of one number. We still have one more CPI, three more GDP prints ( June, July, and Q2), as well as another employment report. Furthermore, there could be additional developments in trade and fiscal policies. That said, today’s number should help Governor Macklem and company lean towards concentrating on growth concerns rather than on inflation.
Yields are 3-5 bps lower, with the bond market pricing in a 90% chance of one 25-bps cut before year-end.
