Canada: For the BoC, inflation it's just right - CIBC

Data released today in Canada showed the CPI dropped 0.15 in August (vs +0.2%). Analysts at CIBC, consider that for the Bank of Canada, inflation isn't running too hot or too cold, it's just right.

Key Quotes: 

“Headline inflation is just a hair below 2%, while the three core measures are averaging bang-on the central bank’s target. Even with some volatility in the monthly numbers from a methodological change, the annual rate of inflation should remain close to target and, resultantly, will take a backseat to the likely deteriorating outlook for growth as monetary policymakers decide whether to cut rates this year.”

“Despite all the moving parts and methodological changes, headline and core inflation measures are tracking the Bank of Canada’s 2% target. Historically, it has taken a sustained period of running the economy hot to see the inflationary pressures bubble up to levels materially above that target. That historical evidence, combined with the weak global inflationary environment, means the Bank of Canada will be more concerned with the outlook for growth, which we see losing steam as the year comes to a close.”

“Given that the upside miss was only slight and that one of the core inflation measures provided a slight offset actually ticking down, markets haven’t been much moved in the aftermath of the release. Investors will now await a key Fed decision coming later today.”