CANADA
- Headline CPI is seen accelerating from 1.9% to 2.2% Y/Y in tomorrow’s February report, owing to a strong non-seasonally adjusted 0.6% M/M (or 0.7% M/M in the below median).
- There’s another wide range to analyst forecasts, ranging from 2.0-2.7% Y/Y in the Bloomberg survey after the 1.9% in January.
- Our review below covers 2.1-2.7%, including CIBC and JPMorgan at 2.1% and RBC at 2.5% (not in Bloomberg survey) and Scotia at 2.7%.
- This uncertainty is likely down to the ending of the GST/HST tax holiday mid-month after its two-month window started mid-Dec.
- GS on the matter: “our forecast assumes 36bp of payback following the removal of the sales tax holiday in mid-February, although we acknowledge some uncertainty around how the cumulative 56bp boost will be distributed across February and March.”
- Core CPI meanwhile (the average of CPI-median and CPI-trim), which will continue to not be directly impacted by the indirect tax changes, is seen accelerating a tenth further to 2.8% Y/Y for what would be its strongest since October.
- Three- and six-month run rates stood at 3.0% and 3.1% annualized respectively in January.
- The BoC forecast from the January MPR saw headline CPI averaging 2.1% Y/Y in Q1 (and more recently saw it at circa 2.5% specifically in March per last week’s decision statement) and core CPI averaging 2.5% Y/Y in Q1 with those core forecasts having got off to a bad start for the quarter.
- BoC-dated OIS currently has 10-11bp of cuts priced for the April BoC decision, after the Bank cut its overnight rate target by 25bps last week to 2.75% for the middle of its estimated neutral rate range of 2.25-3.25%.
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