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Matthieu Arseneau, analyst at National Bank of Canada, point out that despite the “lackluster headline” it today’s Canadian inflation, the CPI report shows strengthening core measures.

Key Quotes:

“Canada’s consumer price index rose 0.1% m/m in April in seasonally adjusted terms causing the year-on-year inflation rate to decline one tick to 2.2%. This was below consensus expectations calling for a 2.3% annual rate.”

“CPI excluding food and energy was flat in seasonally adjusted terms and the year-on-year inflation rate declined one tick to 1.8%. On an annual basis, the CPI-trim stood at 2.1% (up one tick from 2.0%), CPI-Median at 2.1% (up one tick from 2.0%) and CPI-Common at 1.9% (unchanged).”

“Headline inflation was slightly below expectations in April. The strong rise in gasoline prices was offset by weaknesses elsewhere as shown by a flat reading for CPI excluding food and energy. Despite the lackluster monthly result, the Bank of Canada’s preferred gauges continued on their upward trends.”

“Inflation has accelerated since the last Bank of Canada’s rate hike in January, meaning that real policy rate has turned more accommodative. We continue to think that a next rate hike will occur in July as we see the economy accelerating in Q2.”