CANADA
- Today’s January CPI report (0830ET) is the sole CPI release between the Jan 29 and Mar 12 decisions.
- Bloomberg consensus sees a one tenth acceleration across both headline CPI (to 1.9% Y/Y) and the main cores measures (CPI-median to 2.5% Y/Y, CPI-trim to 2.6% Y/Y). The BoC targets a range of 1-3%.
- Remember that Senior Dep Gov Rogers downplayed the strength seen in CPI-trim at last month’s BoC press conference, saying the way it’s calculated has led them not to put much weight on it at this point in time.
- That leaves only one of the Bank’s three 'new' core measures actively watched, CPI-median, having abandoned CPI-common earlier in the cycle. We imagine this will start to see greater market focus on the more traditional core metrics such as CPIxFE and CPIX.
- That said, headline and CPIxFE will continue to be impacted by the two-month GST/HST holiday that began in mid-Dec (i.e. January is the first full month with the distortion vs 18 days of Dec), but median, trim and CPIX all account for indirect tax changes.
- CIBC note that the 0.0% M/M nsa that they forecast for January (which sees 1.8% Y/Y) would have been 0.4% M/M were it not for the GST impact.
- Our crude “underlying” inflation measure – an unweighted average of median, trim, CPIX and CPIxFE – stood at 3.1% annualized in the three months to December for its first time above the target range since Dec 2023 (despite CPIxFE biased lower). However, the slower moving six month run rate held at a more acceptable 2.4% annualized.
- The market currently sees a little less than 50/50 odds of another 25bp cut on Mar 12, in slight favour of a pause, although US tariff deliberations are likely a more important factor.
- The initial 25% tariffs on all Canadian products except for 10% on energy products saw a 30-day postponement until Mar 4 after Canada agreed to bolster border security, whilst 25% tariffs specifically on steel & aluminium are currently set for Mar 10.
- With downside risks to Canadian growth, GDP data for Q4 and the January advance on Feb 28 should also be watched increasingly closely after recent signs of prior monetary policy easing boosting activity.
Summary table below. Note that CIBC, National and RBC aren't included in the Bloomberg survey whilst some of the more detailed estimates from analysts more broadly are missing this time around.
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