Canada: CPI headline below consensus but core inflation strengthening - NBF

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.”