Canada: CPI offers little reason for the Bank of Canada to react - CIBC

Analysts at CIBC, point out that today’s inflation data from Canada came in below expectations, but not enough to move the needle of the Bank of Canada. 

Key Quotes:

“Canadian inflation flew in under expectations for September, but not enough to move the needle on Bank of Canada policy. A sharp reversal in airline fares meant that there was some turbulence in the monthly reading, but since a similar pattern occurred a year ago, the annual pace of inflation was still just a hair below the central bank’s target. As a result, the undershoot versus expectations shouldn’t have any major implications for the Bank of Canada, which we expect to remain on hold later this month.”

“Combined with the strength of the last two employment reports, it now appears that we'll be waiting until January for sufficient signs that a slowing global economy is impacting Canada enough to warrant the lone 25bp rate cut we are projecting.”

“Given that the miss on Canadian CPI was simply the result of a sharper reversal of the prior jump in airline fares, and that all of that volatility is due to a methodological change, there’s little reason for the Bank of Canada to react.”