Canada: Core inflation way above target on a 3-month annualized basis - NBF


Today data showed that the Canadian Consumer Price Index rose 0.7% in March, in line with consensus and the core rate climbed 0.3% surpassing expectations. National Bank's deputy chief economist, Matthieu Arseneau, point out the numbers suggest limited slack in the Canadian economy and no need for rate cuts by the Bank of Canada.

Key Quotes:

“The consumer price index rose significantly for a second consecutive month as gasoline prices surged 11.6%, a pace way above the historical norm for March (past 20 years averaged 4.5%). The rent component continued to rise strongly perhaps due the new methodology put in place by Statistics Canada two months ago.”

“The vigour was not limited to those specific components as shown by the evolution of the Bank of Canada’s preferred measures. Indeed, the average of the three core measures bounced back to 2.0% on a year over year basis while consensus was expecting a much lower 1.8%. Our in-house replication of CPI-Trim and CPI-median are showing an even stronger pace recently, rising respectively 2.8% and 2.9% on a three month-annualized basis. This suggests limited slack in the Canadian economy and no need for rate cuts by the Bank of Canada.”

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