Notes From the Desk: CAD July CPI – And The Trend Goes On.
Canadian inflation continues to move towards the Bank of Canada’s 2% target.
By The Numbers:
- YoY CPI 2.5% (2.5% expected), the lowest level in 3 years.
- YoY CPI Core Median – 2.4% (2.5% expected).
- YoY CPI Core Trim – 2.7% (2.8% expected).
The Notables:
- Core goods prices continue to recede posting a -0.2% decline.
- Airfare/travel decelerated bringing some relief to core services.
- Shelter costs posted their smallest MoM increase (0.2%) since February 2023 due to muted rental increases.
- Telco’s look to shore up earnings as telephone prices rose 2.5%
The Implications:
With inflation within the 1-3% band and moving lower, the Bank of Canada is set to cut rates by 25 bps at their next three meetings this year. If the unemployment rate keeps moving higher, the odds of one of those cuts being 50 bps will increase.
The Bond market had already priced in another 75 bps of cuts this year and a 3% overnight a year from now. Thus, today’s data led to a muted reaction with yields dipping only a few basis points lower.
