CANADA
- There have been two CPI reports since the last BoC meeting, with the BoC’s preferred core services (average of median and trim) surprisingly strong in November before moderating as expected in December in Y/Y terms.
- Headline was also close to median expectations in December, impressive considering the wide range of analyst views on the back of uncertainty over the impact from the temporary GST/HST tax holiday.
- Headline CPI came in at 1.8% Y/Y in a range that spanned from 1.2-2.1% Y/Y, averaging 1.9% in Q4 vs the 2.1% BoC had forecast back in October.
- Core CPI on the other hand, whilst being as analysts expected in December at 2.45% Y/Y, has seen a sizeable overshoot of BoC forecasts with an average 2.6% in Q4 vs 2.3% projected.
- What’s more, the latest three-month run rate has accelerated to 3.5% annualized for its fastest since Sep 2023 after two consecutive months above the 1-3% target band. The smoother six-month run rate meanwhile stands at 2.8% annualized, remaining within the band but at joint highs since Jan 2024.
- Headline CPI will continue to be distorted by the temporary tax holiday in the next couple months of data although the preferred core metrics exclude indirect taxes and so shouldn’t be directly impacted by the changes.
211 words