Post-CPI CAD Sell-Side Views (1/2)

BMO: Importantly, January can set the tone for inflation, since firms often take the opportunity to adjust prices for the year in this month—and there was little sign of a big January bump this year.

• BoC will likely remain cautious in the face of still-strong wage gains, firm services prices, and the reality that core inflation is still holding above 3%. But clearly today's result makes rate cuts much more plausible in coming months, and we remain comfortable with our call that the Bank will begin trimming in June.

CIBC: The unexpectedly large declines in airline fares and clothing prices may be a sign of weakness in consumer spending, but could also partly reflect some data volatility. Even with GDP growth running somewhat stronger than they expected, we still anticipate that interest rate cuts will start in June.

Desjardins: Every measure of inflation came in below expectations. At 2.9% y/y, headline inflation is starting Q1 2024 off below the Bank’s forecast of 3.2% in the January 2024 Monetary Policy Report.

• Along with ongoing weakness in the Bank’s consumer and business surveys, January’s deceleration in inflation helps to reinforce the case for rate cuts to begin in Q2 2024. This despite the surprising strength of the Canadian economy at the end of 2023 and start of 2024.