23 Mar 2015
Canadian CPI downside likely – Scotiabank
FXStreet (Barcelona) - The Research Team at Scotiabank, reviews the Canadian CPI data releases, and further adds that downside risks for inflation are likely further down the line.
Key Quotes
“February brings a seasonal bump in inflation which materialized this month. Coupled with the rise in gasoline prices in Feb., CPI looked strong on headline (the gasoline price increase) and on core (the seasonality) in monthly terms. In seasonally adjusted terms, CPI was a more reasonable +0.2% m/m on headline and +0.1% m/m on core.”
“From a BoC perspective, inflation is shaping up largely in line with forecasts if even a little bit stronger.”
“That said, we think that the impact of the oil price shock particularly on inflation should be felt further on down the line as reduced economic activity leads to lower inflationary pressure and softer core CPI with downside risks, with whatever upside materializes coming from a softer C$ and not a stronger domestic economy.”
“The point is that the claim that the impact of lower oil prices on CPI (and for that matter on the broader economy) should be ‘front loaded’ is an optimistic one — and the data won’t necessarily play out that way.”
Key Quotes
“February brings a seasonal bump in inflation which materialized this month. Coupled with the rise in gasoline prices in Feb., CPI looked strong on headline (the gasoline price increase) and on core (the seasonality) in monthly terms. In seasonally adjusted terms, CPI was a more reasonable +0.2% m/m on headline and +0.1% m/m on core.”
“From a BoC perspective, inflation is shaping up largely in line with forecasts if even a little bit stronger.”
“That said, we think that the impact of the oil price shock particularly on inflation should be felt further on down the line as reduced economic activity leads to lower inflationary pressure and softer core CPI with downside risks, with whatever upside materializes coming from a softer C$ and not a stronger domestic economy.”
“The point is that the claim that the impact of lower oil prices on CPI (and for that matter on the broader economy) should be ‘front loaded’ is an optimistic one — and the data won’t necessarily play out that way.”