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A Lift In Near-Term Underlying Inflation But Not Enough To Rule Out A Second Cut Next Week

CANADA DATA
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  • At face value, Canadian inflation was about as expected in June, with headline at 2.7% Y/Y (cons 2.7), with the Q2 average of 2.8% confirming a miss of the BoC’s 2.9 from April.
  • Further, the average of median and trim dipping fractionally to 2.75% Y/Y (cons 2.75) from a slightly downward revised 2.8%.
  • There were offsetting surprises, with median softer at 2.6 (cons 2.7) and trim hotter 2.9 (cons 2.8). Trimmed CPI sees a third month below 3% Y/Y, median a fourth.
  • The latest run rates look slightly firmer than limited analyst expectations though, with the 3-mth median/trim average accelerating to 2.9% annualized after 2.5% but nevertheless a fifth month in the 1-3% target range.
  • It comes from a 0.24% M/M increase in June after the surprisingly hot 0.33% in May, following four months averaging close to 0.1% M/M through Jan-Apr.
  • Other three month metrics on balance: CPIxFE held at 3.0% annualized after a downward revised 3.0 (initial 3.2) and CPIX held at a soft 2.1%.
  • Weighting the four different core measures together, our take on three-month underlying inflation accelerated two tenths to 2.7% whilst the six month dipped a tenth to 2.0%.
  • Whilst latest core trends weren’t as soft as they could have been, at first glance it removes a risk of a second month of more pronounced renewed inflation. That has seen 2Y GoC yields currently little changed vs 2Y Tsy yields climbing 4bps on retail sales strength and UDSCAD briefly breaching 1.3700.

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  • At face value, Canadian inflation was about as expected in June, with headline at 2.7% Y/Y (cons 2.7), with the Q2 average of 2.8% confirming a miss of the BoC’s 2.9 from April.
  • Further, the average of median and trim dipping fractionally to 2.75% Y/Y (cons 2.75) from a slightly downward revised 2.8%.
  • There were offsetting surprises, with median softer at 2.6 (cons 2.7) and trim hotter 2.9 (cons 2.8). Trimmed CPI sees a third month below 3% Y/Y, median a fourth.
  • The latest run rates look slightly firmer than limited analyst expectations though, with the 3-mth median/trim average accelerating to 2.9% annualized after 2.5% but nevertheless a fifth month in the 1-3% target range.
  • It comes from a 0.24% M/M increase in June after the surprisingly hot 0.33% in May, following four months averaging close to 0.1% M/M through Jan-Apr.
  • Other three month metrics on balance: CPIxFE held at 3.0% annualized after a downward revised 3.0 (initial 3.2) and CPIX held at a soft 2.1%.
  • Weighting the four different core measures together, our take on three-month underlying inflation accelerated two tenths to 2.7% whilst the six month dipped a tenth to 2.0%.
  • Whilst latest core trends weren’t as soft as they could have been, at first glance it removes a risk of a second month of more pronounced renewed inflation. That has seen 2Y GoC yields currently little changed vs 2Y Tsy yields climbing 4bps on retail sales strength and UDSCAD briefly breaching 1.3700.