Canada: CPI offers little reason for the Bank of Canada to react – CIBC

Analysts at CIBC, point out that today’s inflation data from Canada came in below expectations, but not enough to move the needle of the Bank of Canada.  

Key Quotes:

“Canadian inflation flew in under expectations for September, but not enough to move the needle on Bank of Canada policy. A sharp reversal in airline fares meant that there was some turbulence in the monthly reading, but since a similar pattern occurred a year ago, the annual pace of inflation was still just a hair below the central bank’s target. As a result, the undershoot versus expectations shouldn’t have any major implications for the Bank of Canada, which we expect to remain on hold later this month.”

“Combined with the strength of the last two employment reports, it now appears that we’ll be waiting until January for sufficient signs that a slowing global economy is impacting Canada enough to warrant the lone 25bp rate cut we are projecting.”

“Given that the miss on Canadian CPI was simply the result of a sharper reversal of the prior jump in airline fares, and that all of that volatility is due to a methodological change, there’s little reason for the Bank of Canada to react.”