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RBC On Canadian CPI (Aug 16, 0830ET)

CANADA
  • RBC sees Canadian CPI inflation mirroring the July drop in the U.S., expecting headline CPI to slow from 8.1% to 7.7%Y/Y (led by gasoline declining almost 10% since July although is still up more than 30% Y/Y).
  • Global pressures easing off: “Oil prices are down 25% from early June. Global freight shipping costs and times, by air and ocean, have fallen significantly over the past few months”.
  • Domestic factors: “Though higher interest rates are pushing up mortgage payments, home buying costs (which have contributed substantially to price growth over the last year) have shifted from record monthly increases over the winter to declines in the spring and summer”, whilst their own cardholder data shows consumer spending still very strong but plateauing through July and into Aug.
  • Despite the expected dip, inflation remains much too high and isn’t likely to return sustainably to the BoC’s target without the economy cooling. RBC expect a 75bp hike in Sept to follow July’s 100bp.
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