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CPI Preview, July: Potential Long-Awaited Moderation In Core Run Rates

CANADA DATA
  • Released on Tuesday at 0830ET, Canadian headline CPI inflation is seen at a non-seasonally adjusted 0.3% M/M in July, for 3.0% Y/Y (+0.2pps).
  • It would mean headline CPI right at the top of the BoC’s 1-3% target range after large moderation in recent months saw June with the first print in the target range since spring 2021. Base effects likely mean a larger push higher for the Y/Y is in store for August.
  • Analysts pencil in the average of the BoC’s preferred median and trim measures to slow 0.15pps to 3.65% Y/Y but more focus is likely on the latest monthly trend.
  • A similar M/M reading to June (0.3% M/M for both) would see these core measures slow from 3.8% to 3.2% annualized on the three-month run rate that it focuses on, breaking a string of readings in the 3.5-4% range since September with the continued recent resilience playing a large role in the last two BoC hikes.
  • For those preferring a more traditional core metric (ex food & energy), CIBC, who are above consensus with headline at 0.4% M/M NSA, look for 0.3% M/M SA after two months at 0.14% M/M. That would see the three-month slow to 2.3% from 2.5% after already a larger moderation than the BoC’s preferred core measures in recent months.
  • This is the last CPI reading before the BoC decision on Sep 6, with the market currently pricing in a little under 1/3 probability of a 25bp hike.
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