- Prior was 3.0%
- CPI +0.1% m/m vs +0.2% expected
- BOC core 2.2% y/y vs 2.4% prior
- BOC core 0.0% m/m vs +0.1% prior
- CPI median 1.9% vs 1.9% expected (prior was 2.0%)
- CPI trim 1.8% vs 1.9% expected (prior was 1.9%)
- CPI common 2.4% vs 2.6% prior
This is a good report from the Bank of Canada and should ease pressure on them to hike rates. At the same time, that’s a negative for the Canadian dollar and we quickly saw USD/CAD rose to 1.4106 from 1.4075.
USDCAD 10 mins:
For background, Statistics Canada publishes the Consumer Price Index monthly, usually in the third week of the following month at 8:30 am ET. It measures price changes for a fixed basket of goods and services bought by Canadian households, covering shelter, food, transportation, household operations, clothing, health, recreation and alcohol and tobacco.
Unlike in the US, the market’s focus is the year-over-year change in the unadjusted index rather than the seasonally adjusted monthly change, though both are published. The Bank of Canada targets 2% total CPI inflation, the midpoint of a 1% to 3% control range, and its mandate is framed around that headline measure.
Because headline inflation can be distorted by volatile items like gasoline and food, the Bank also watches its preferred core measures, CPI-trim and CPI-median. CPI-trim excludes the components with the most extreme price moves each month. CPI-median takes the price change at the 50th percentile of the basket. Markets often look at the average of the two. Other core gauges include CPIX and CPI excluding food and energy.
Shelter is the largest component and a frequent source of noise. It includes mortgage interest cost, which creates a quirk in the data: when the Bank raises interest rates, mortgage costs rise and push measured inflation higher, at least temporarily. Rent and homeowners’ replacement cost are also closely watched.
Canadian CPI is one of the most market-moving domestic releases, with surprises in the core measures in particular able to shift Bank of Canada rate pricing and move the Canadian dollar. With the US the dominant trading partner, tariffs and exchange-rate swings have become an important channel for imported inflation
This article was written by Adam Button at investinglive.com.