Canadian CPI Preview: Forecasts from six major banks, downward path could see a minor detour

Statistics Canada will release January Consumer Price Index (CPI) data on Tuesday, February 21 at 13:30 and as we get closer to the release time, here are the forecasts by the economists and researchers of six major banks regarding the upcoming Canadian inflation data.

Headline is expected at 6.1% year-on-year vs. 6.3% in December. However, on a monthly basis, it is expected to have risen by 0.7%.  

RBC Economics

“Canadian inflation pressures are expected to have lightened up again in January, with headline inflation growing at 6.1%. Core CPI is also expected to have edged lower again, to 5.1% YoY. The Bank of Canada’s preferred CPI trim and median measures are also expected to tick lower. We continue to look for the Bank of Canada to hold rates at current levels.”

TDS

“We look for CPI to decline to 6.0% in January as higher gasoline and food prices drive a 0.6% MoM increase. Mortgage interest costs and rents will remain a key driver for shelter, while household furnishings and clothing should weigh on the headline index. We also look for improvement across core CPI measures, with CPI-trim/median edging 0.2pp lower to 4.95%.”

NBF

“Rising gasoline prices, combined with a strong showing in the services segment, should have contributed to boosting the headline figure. Core goods inflation, on the other hand, should have continued to decelerate, but not enough to prevent the headline index from advancing 0.6% MoM (before adjustments for seasonality). If we’re right, the 12-month rate could still drop three ticks to 6.0%. The annual rate of core measures should have moderated as well, with CPI-trim likely easing from 5.3% to 5.1% and CPI-median moving from 5.4% to 5.2%.”

CIBC

“A slight rebound in gasoline prices, coupled with a further rapid increase in mortgage interest costs, could have seen prices rise by 0.8% on the month and the annual rate of inflation hold steady at 6.3%. However, further moderation in imported goods prices should mean that core inflation excluding food, energy and mortgage interest likely rose at a monthly pace which is broadly consistent with a 2% inflation target.”

Citibank

“Canada CPI NSA MoM (Jan) – Citi: 0.8%, prior: -0.6%; CPI YoY – Citi: 6.3%, prior: 6.3%.  The evolution of the core measures will be the most important element of the CPI report. Based on Citi analyst estimates of the monthly profile of core inflation, CPI-trim and CPI-median could drop somewhat this month due to base effects but there are risks of core inflation stabilizing over the summer around a still-too-high 3-4%.”

Wells Fargo

“As the pressure from high energy prices continues to dissipate, we expect headline inflation to have eased further to 6.0% in January. Against a backdrop of improving inflation dynamics, the Bank of Canada (BoC) formally announced an end to its monetary tightening cycle with a final 25 bps hike to 4.50%. In our view, the Bank of Canada will remain on hold for the next few quarters before being among the first to start cutting policy rates. Our forecast sees the BoC beginning its easing cycle in Q4 of this year as recessionary conditions start to crystallize.”