The timing of a temporary tax holiday effective mid-December sees a wide range of analyst CPI estimates for December
Executive Summary
- Released at 0830ET today, there is greater than usual uncertainty to the December CPI report, primarily owing to temporary tax cuts that became effective mid-month.
- Analysts are split whether the largest impact landed in December or January, with headline CPI estimates of analysts viewed below ranging from 1.2% to 2.1% Y/Y, after 1.9% in November.
- The BoC’s preferred core won’t be directly impacted but can be swayed by behavioural changes.
- Consensus readings should see headline undershoot BoC forecasts but core CPI overshoot after some recent upside surprises that have seen the 3-month rate accelerate above the 1-3% target range.
- With analysts split, we expect modest surprises to consensus in either direction to be faded with arguments made for a reversal next month.
- Instead, considering the broader backdrop of tariff threats, we expect greater sensitivity to upside surprises in the BoC’s preferred core metrics.
- Ultimately though, USDCAD is still likely to be dominated by tariff-related headlines in the interim.
PLEASE FIND THE FULL REPORT HERE: CanadaCPIPrevJan2025.pdf
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