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CIBC: BoC Narrative Will Determine The Data And Not The Other Way Around

CANADA
  • CIBC note that "not much has changed over the past few months. Growth in the Canadian remains weak and inflation, as judged by the Bank’s preferred core measures, has showed some but not enough progress.”
  • “We expect that to be the main message of the press conference will be to draw a line in the sand that we need to see further progress on the inflation before discussing rate cuts.”
  • “There will likely be another token reference to the possibility of further monetary restraint, but that should be balanced by an acknowledgement of flexibility to get back to target and the outsized role of shelter costs.”
  • “What we would like to see is the Bank putting greater weight on a broader set of inflation measures (cough …*CPIX*…cough) as a guidepost to monetary policy.”
  • “When you have too many choices of preferred measures, that are themselves moving targets, things can get very confusing. [...] At this point following any CPI release, the Bank and the market have to look at no less than 30 inflationary numbers to come up with a narrative.”
  • “The narrative will determine the data and not the other way around" with the tone of Macklem's press conference becoming "increasingly more important than any new data releases because, at the end of the day, the Bank can always find an inflation number to fit its narrative.”
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