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CANADA: Desjardins See CPIxFE Moderating To 2.5% Y/Y In August

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  • Desjardins, one of the more dovish analysts, expect headline CPI to decelerate “notably” from 2.5% to 2.0% Y/Y, “due in part to base effects, which should fade in the coming months and lead to slightly higher inflation by the end of the year.”
  • “The BoC governor has warned about this expected increase in inflation on several occasions, and we’re not concerned that this will prompt central bankers to abandon their rate cutting campaign.”
  • They also expect CPIxFE to have moderated to 2.5% Y/Y, “the slowest pace of annual growth since mid-2021.”
  • “The overall distribution of price growth is normalizing, and central bankers will look for further progress in August. The share of prices growing above 3% has largely normalized, but services inflation remains more stubborn. Sticky shelter prices are part of the issue, although we did see several shelter components slow more than expected in July. The hope is that this continued in August.”
  • “For the BoC’s preferred measures, headline annual rates should have moved lower as well, while 3-month annualized rates likely remained within the BoC’s target range.”
  • “Canadian central bankers will monitor inflation, but the focus has largely shifted towards managing the downside risks to employment and economic activity.”
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  • Desjardins, one of the more dovish analysts, expect headline CPI to decelerate “notably” from 2.5% to 2.0% Y/Y, “due in part to base effects, which should fade in the coming months and lead to slightly higher inflation by the end of the year.”
  • “The BoC governor has warned about this expected increase in inflation on several occasions, and we’re not concerned that this will prompt central bankers to abandon their rate cutting campaign.”
  • They also expect CPIxFE to have moderated to 2.5% Y/Y, “the slowest pace of annual growth since mid-2021.”
  • “The overall distribution of price growth is normalizing, and central bankers will look for further progress in August. The share of prices growing above 3% has largely normalized, but services inflation remains more stubborn. Sticky shelter prices are part of the issue, although we did see several shelter components slow more than expected in July. The hope is that this continued in August.”
  • “For the BoC’s preferred measures, headline annual rates should have moved lower as well, while 3-month annualized rates likely remained within the BoC’s target range.”
  • “Canadian central bankers will monitor inflation, but the focus has largely shifted towards managing the downside risks to employment and economic activity.”