Analysts at TD Securities think that the Bank of Canada (BoC) remains on track to start lowering the policy rate before the Federal Reserve (Fed) following the latest inflation data.

Third consecutive miss for headline CPI weighed on CAD

"Headline CPI edged higher to 2.9% y/y in March, in line with the market consensus, but details were considerably softer with further progress across the Bank of Canada's preferred measures of core inflation and inflation breadth. CPI-trim/median edged lower to 2.95% y/y on average, as another 0.1% m/m increase saw 3m core inflation rates fall to just 1.3%."

"Today's report provides the Bank of Canada with some additional evidence that recent inflation progress was sustained through March, but we would note the ex. food/energy aggregate saw a much stronger performance, and there is still the risk that recent progress is unwound in April. We do not think today's report is enough to lock in a June cut and still think July is the more likely start to the BoC's easing cycle, but today's report will add to the risk of an earlier move."

"The third consecutive miss for headline CPI weighed on CAD and leaves the Bank of Canada on track to start cutting comfortably before the Fed."

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