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Feb Inflation Watch: Signs Of Easing Pressures Ahead of BOC Decision

BOC
  • BoC said March rate decision would focus on: evolution of excess demand, inflation expectations, wage growth, and corporate pricing power.
  • Macklem saw economy moving into excess supply, with the Bank estimating output gap between -0.25% and -1.25% in Q4.
  • Q4 GDP is due Thurs and likely beating the BOC estimate of 0.0% after StatsCan flash showing +1.2%. That still does little to change the idea the economy is running below potential after 10 rate hikes.
  • Q1 GDP is expected at +0.5% as forecast by the Bank. Strikes caused hours worked to fall 1% over the quarter, weighing down GDP.
  • BOC's Jan MPR said consumer inflation expectations have not declined significantly and distribution of expectations has widened.
  • Unemployment stalled in Dec and decreased in Jan with wage gains still running hot, +5.3% YOY.
  • The Bank says businesses are returning toward their pre-pandemic pricing behaviors. StatsCan reported Mon the share of firms planning price increases rose for first time in a year in Q1 to 25.2%, but still below year-ago rate of 32.9%.
  • Global oil prices are lower than the BoC expected in prior projections as demand weakens. While political risks remain, they are no longer anticipated to create a negative supply shock.
  • CPI continues to ease as headline fell more than expected in Jan, now +2.9%. BoC's preferred core measures of CPI are the lowest in 2 years.
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