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CIBC: Accelerating Core CPI Keeps BoC On For 75bp Hike In Sept

CANADA

CIBC note that Canadian inflation has taken its foot off the gas as headline eased to 7.6% Y/Y in July, but other elements were not as reassuring, seeing the BoC on track for a 75bp increase in September.

  • Gasoline prices were the main driver of the headline slowdown as expected but in bad news for consumers, food prices resumed their climb after taking a pause in June. CPI inflation excluding food and energy spelled further trouble rising 0.5% M/M on a seasonally adjusted basis.
  • With the large revisions to CPI common in recent months muddying the message from the preferred core measures, the BoC is probably keeping a close eye on inflation ex food/energy these days and the increase from 5.3% to 5.5% Y/Y is not good news.
  • Inflation seems to finally have started its long descent but the acceleration in inflation excluding food and energy will be a concern. Headline should fall further but the Bank’s focus should be on shelter prices (outside of mortgage costs), which should decelerate with the cooling housing market, and overall service inflation.
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