Notes From the Desk: CAD CPI – A Pleasant Surprise
After months of speculation and anticipation regarding the impact of higher rates on inflation, the Bank of Canada (BoC) received positive news with today’s CPI report.
By the Numbers.
- Headline CPI YoY. 2.9% (3.4% expected)
- Core inflation Y0Y. 2.4% (2.6% expected)
- CPI Median Y0Y. 3.3% (3.5% expected)
- CPI Trim YoY. 3.4% (3.6% expected)
The implications.
Despite expectations of higher inflation due to increased mortgage costs, the report indicates a decrease in CPI, largely attributed to factors such as energy, food, airfares, and clothing. Additionally, sluggish consumer demand in discretionary spending areas has contributed to this decline in prices.
Yields across the curve have fallen by 3 – 12bps, as traders speculate on the timing of the first rate cut, with increasing bets favouring June. While the debate over the timing of the first rate cut is amusing, we think investors should remain focused on the high probability that the BoC will lower rates this year.
