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“We expect headline CPI to hold at 2.5% y/y, with prices flat on the month (0.3% seasonally adjusted),” TD Securities analysts said in a recently published report.

Key quotes

“Gasoline prices rose on the month while warmer than normal temperatures suggest energy services could see a boost as well. Currency depreciation (-3% cumulative since April) along with tariffs imposed on the US on July 1 skew risks to the upside in our view. Retaliatory tariffs targeted $16.6bn of US imports and were split equally between steel/aluminum products and consumer goods.”

“The largest consumer categories, hit with a 10% tariff, include food items (condiments, coffee, candy), household appliances and personal care products. Taken together with steel and aluminum tariffs, price categories to watch are food at home, alcohol, vehicles, household furnishings, and personal care products. Note however that the tariffs on balance impact just 3% of merchandise imports, and we expect price impacts to feed through at a lag.”

“For the core, we expect to see the gap between exclusion-based core indexes (CPIX and CPIXFE) and BoC core measures to narrow with this report, with the latter staying near 2.0% on average and the former moving marginally higher. Looking ahead, July CPI likely marks the peak this year, as we continue to expect a moderation toward 2.0% through year-end.”