Macro Since Last BoC - Inflation: Bumpy Disinflation Path Continues

Bumpy Disinflation Path Continues, This Time With A Surprise Sizeable Shift Lower

• The CPI report for January provided the main dovish skew over the past six weeks, with the variability in recent trends a timely reminder that the disinflationary progress is unlikely to be smooth.
• For a simple overview, headline CPI printed 2.9% Y/Y vs the 3.3% expected and 3.4% in Dec, whilst the median and trim measures averaged 3.35% Y/Y vs the 3.6% both expected and seen in Dec.
• Latest trends of CPI-median and CPI-trim saw the 3-month rate slow from 3.6% to 3.2% (still above the 2.9% in Nov) and the 6-month rate slow from 3.7% to 3.3% for its lowest since mid-2021.
• Further, the BOC in January pushed towards focusing on “underlying” inflation, which Macklem revealed to be a range of measures including CPIxFE and CPIX in addition to the median and trim.
• Those saw more notable moderation in trend terms into January: CPIxFE averaged 2.5% and 2.9% over three and six months whilst CPIX averaged 1.6% and 2.0%, the latter the first time at or below the 1-3% target range midpoint since early 2020.
• Running a crude average across those measures, “underlying” inflation was potentially running at 2.6% annualized over three months and 2.9% annualized over six months, with both readings under the 3% upper limit.