Canadian CPI Preview: Forecasts from five major banks, inflation growth to decelerate

Statistics Canada will release February Consumer Price Index (CPI) data on Tuesday, March 21 at 12:30 and as we get closer to the release time, here are the forecasts by the economists and researchers of five major banks regarding the upcoming Canadian inflation data.

Headline is expected at 5.4% year-on-year vs. 5.9% in January. If so, CPI would be the lowest since January 2022 but still well above the 1-3% target range. However, on a monthly basis, it is expected to have risen by 0.6% after a 0.5% gain in January.

RBC Economics

“We expect Canadian headline CPI growth slipped to 5.4% YoY in February from 5.9% in January. Lower gasoline prices in February (down 3.6% monthly) could push energy CPI below year-ago levels for the first time in two years. Food inflation is still exceptionally high, and likely remained elevated in February. Shelter CPI is expected to have trended over, though accelerating mortgage interest costs partially offset weaker price growth for expenses related to home-buying. More importantly, the BoC’s preferred core measures – CPI trim and median – are expected to continue to moderate on a three-month moving average basis. That together with narrowing breadth of inflation pressure suggests persistent easing in fundamental price pressure, which should be enough to keep the BoC on hold through the end of this year.”

TDS

“We look for CPI to continue trending lower to 5.3% YoY as core measures soften to 4.8%. Base-effects will play a large role with prices up 0.5% MoM, but energy prices will also exert a drag. This would leave Q1 CPI tracking slightly below the January MPR, but we would note the evolution of financial sector vulnerabilities will be the larger factor for the near-term BoC outlook.”

CIBC

“While the annual pace of inflation likely cooled further in February, the monthly increase excluding food/energy may look a little firmer than in the prior month. Gasoline will be the main driving force behind a deceleration in the headline rate of inflation to 5.4%, from 5.9% in the prior month, as pump prices were broadly unchanged this February, but saw a big jump in the same month a year ago. While another sharp monthly increase in food prices is likely to be seen, it isn’t expected to be any stronger than the surge seen in February 2022. Excluding food and energy, prices are expected to increase by a seasonally adjusted 0.25%, which would be an acceleration from a 0.14% advance in January, due to increases in air fares, rents and other items. The BoC’s core measures of inflation are expected to ease a little further on a YoY basis, but the three-month annualized rates will likely remain sticky around 3½% due to the impact that food prices can have on these measures.”

NBF

“A slight decline in gasoline prices, combined with a drop in the natural gas segment, should have benefited consumers during the month. The increase in food costs, meanwhile, could have moderated following January’s surge. Headline inflation could nonetheless have increased 0.5% MoM (0.2% after seasonal adjustment) on gains in several services categories. If we’re right, the 12-month rate could still drop six ticks to 5.3% on account of a strongly negative base effect. The annual rate of core measures should have moderated as well, with CPI-trim likely easing from 5.1% to 4.9% and CPI-median moving from 5.0% to 4.8%.”

CitiBank

“We expect a 0.5% MoM rise in CPI in February, although with risks tilted slightly to the upside. Key shelter prices should remain soft in line with modestly declining new home prices, although with possible further upside to shelter prices such as rents. The 3mth pace of core inflation is still running around 3-4% on an annualized basis, which notably was referred to for the first time in the March policy statement as too high. This could eventually be cited as a factor leading the BoC to adjust rates higher again.”