It’s likely a fait accompli, but more information is surfacing that will encourage the Bank of Canada (BoC) to not increase its overnight rate March 8..The key figure is the most recent consumer price index (CPI) number, 5.9% in January, down from 6.3% in December and well off the peak of 8.1% recorded in June 2022..January’s number defied expectations (predictions were the rate would be 6.1% for the month) which “represents a rare downside surprise in both headline and core inflation,” said Doug Porter, chief economist and managing director at BMO Economics..Canada was “due for some better inflation luck, with a cooling economy and improved supply chains also contributing,” said Porter in his latest analysis..“There were some special factors at play helping hold CPI back, even as gasoline prices bounced nearly 5% in the month,” said Porter. “Cell services were slashed 7.9% as sales lingered into the New Year, and new vehicle prices eased slightly versus a large rise a year ago (helping cut the annual growth rate a point to 6.2%).”.“Alberta electricity prices reported the largest monthly drop on record (-45.6%), and that province suspended its gasoline tax at the start of the year, leaving it with the lowest inflation rate in the country (at 5%).”.It wasn't all sweetness and light on the inflation front, said Porter..“Food prices refuse to relent. A surge in meat prices lifted grocery prices 2% month-over-month boosting the annual rise back up to 11.4% year-over-year, matching a 40-year high. Restaurant prices are also rising rapidly, now up 8.2% year-over-year, the fastest since the GST kicked in 32 years ago,” he said..“Even as gasoline prices bounced last month, they weren't a factor in the overall annual inflation rate as they rose by a nearly identical tally last January. However, with prices headed for a small dip this month, pump prices have now turned negative on a year-to-year basis, which should help grease a further slide in headline inflation in the next two months.”.“Overall, this milder report will provide the BoC with some comfort on their decision to move to a conditional pause, acting as a strong antidote to the run of robust growth figures seen in recent weeks.”.Veteran economist Sherry Cooper said the “meaningful” deceleration in the Canadian economy last month essentially validated the approach the BoC adopted after its benchmark interest rate reached 4.5%..“[Inflation figures] confirm the wisdom of their announced pause in rate hikes at the January meeting,” said Cooper..“Despite continued strength in the labour market and January retail sales, headline and core inflation measures have declined again, with a five handle now on the headline rate. That is still a long way to the (5.9% inflation forecast) by the end of this year, but it is moving in the right direction.”.Cooper is not expecting a rate increase next month..“There will be no BoC action when they meet again on March 8,” she said.."Their press release will be scrutinized for a hawkish versus dovish tone. Regardless of upcoming data, there is virtually no chance of any rate cuts this year.”
It’s likely a fait accompli, but more information is surfacing that will encourage the Bank of Canada (BoC) to not increase its overnight rate March 8..The key figure is the most recent consumer price index (CPI) number, 5.9% in January, down from 6.3% in December and well off the peak of 8.1% recorded in June 2022..January’s number defied expectations (predictions were the rate would be 6.1% for the month) which “represents a rare downside surprise in both headline and core inflation,” said Doug Porter, chief economist and managing director at BMO Economics..Canada was “due for some better inflation luck, with a cooling economy and improved supply chains also contributing,” said Porter in his latest analysis..“There were some special factors at play helping hold CPI back, even as gasoline prices bounced nearly 5% in the month,” said Porter. “Cell services were slashed 7.9% as sales lingered into the New Year, and new vehicle prices eased slightly versus a large rise a year ago (helping cut the annual growth rate a point to 6.2%).”.“Alberta electricity prices reported the largest monthly drop on record (-45.6%), and that province suspended its gasoline tax at the start of the year, leaving it with the lowest inflation rate in the country (at 5%).”.It wasn't all sweetness and light on the inflation front, said Porter..“Food prices refuse to relent. A surge in meat prices lifted grocery prices 2% month-over-month boosting the annual rise back up to 11.4% year-over-year, matching a 40-year high. Restaurant prices are also rising rapidly, now up 8.2% year-over-year, the fastest since the GST kicked in 32 years ago,” he said..“Even as gasoline prices bounced last month, they weren't a factor in the overall annual inflation rate as they rose by a nearly identical tally last January. However, with prices headed for a small dip this month, pump prices have now turned negative on a year-to-year basis, which should help grease a further slide in headline inflation in the next two months.”.“Overall, this milder report will provide the BoC with some comfort on their decision to move to a conditional pause, acting as a strong antidote to the run of robust growth figures seen in recent weeks.”.Veteran economist Sherry Cooper said the “meaningful” deceleration in the Canadian economy last month essentially validated the approach the BoC adopted after its benchmark interest rate reached 4.5%..“[Inflation figures] confirm the wisdom of their announced pause in rate hikes at the January meeting,” said Cooper..“Despite continued strength in the labour market and January retail sales, headline and core inflation measures have declined again, with a five handle now on the headline rate. That is still a long way to the (5.9% inflation forecast) by the end of this year, but it is moving in the right direction.”.Cooper is not expecting a rate increase next month..“There will be no BoC action when they meet again on March 8,” she said.."Their press release will be scrutinized for a hawkish versus dovish tone. Regardless of upcoming data, there is virtually no chance of any rate cuts this year.”
