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

RBC: CPI came in softer than expected with the breadth of inflation still showing signs of gradual easing, but also still wider than would be consistent with the BoC’s 2% inflation target.

• The most likely path for inflation going forward is still lower with per-capita GDP and consumer spending continuing to decline. But a strong start to 2024 for labour markets gives the BoC more leeway to wait for firmer signs that inflation is getting back under control before pivoting to interest rate cuts. As of now, our base case assumes the BoC starts to lower interest rates around mid-year.

TD Securities: A meaningful event for the near-term BoC outlook and should help reinforce rate cuts are coming. Still, we think the Bank will proceed cautiously and require further evidence of moderation before it shifts its stance.

• Today's report will not be enough for the Bank to declare mission accomplished in March, but it does move the goalposts a little closer. They reiterate outright steepeners in 5s30s in Canada and vs the US.
• While we do not see an obvious catalyst to push headline CPI back above 3.0% y/y in the coming months, the risk is not trivial and the Bank of Canada will need to see more evidence of fading price pressures before it can declare a sustained return to the target range.