Canada: Soft inflation not likely to influence on BoC - Wells Fargo
|Analysts from Wells Fargo noted that Canadian consumer prices picked up in March, but not enough to lift the year-over-year rate as the consensus had expected.
Key Quotes:
“After an unexpected slowing in Canadian CPI in March, consumer prices picked up in April, but not as much as expected. The monthly increase of 0.4 percent kept the year-over-year rate of CPI inflation unchanged at 1.6 percent. Headline CPI inflation had been running at 2.0 percent earlier this year, spot-on the midpoint of Bank of Canada’s (BoC) 1.0 percent to 3.0 percent target range.”
“Still, we do not expect the latest inflation figures to substantively influence the BoC’s policy at its meeting next week. In fact, the inflation story is more or less living up to the Bank’s expectations. Following its April 12 meeting the BoC said that “CPI inflation is expected to dip in the months ahead, as the temporary factors unwind, and then return to 2 per cent later in the projection horizon as the output gap closes.”
“In a separate report also released this morning, Canadian retailers reported a 0.7 percent improvement in March sales after a drop in sales the prior month. The better-than-expected rebound was mostly a function of the strength in motor vehicle sales. Excluding autos, sales were actually down 0.2 percent. On balance we remain cautious on the outlook for the ability of consumer spending to sustain Canadian economic growth in the way that it has thus far in this expansion.”
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