- Headline CPI edged up to 1.5% year-over-year from 1.4% in January, slightly ahead of market expectations.
- The BoC’s core inflation measures were little changed, though the average dipped to 1.8% after rounding. After rising to 2% in early-2018, these measures have shown little upward momentum—consistent with the economy reaching capacity but not going much beyond its limits.
- There were few surprises in the details. We saw the usual seasonal increases in travel services and clothing prices. Rent and airfares, which have been volatile due to methodology changes, didn’t stand out in February.
- The drag from energy lessened as gasoline prices rose month-over-month in February (for the first time since last July). Disinflationary pressure from energy prices should continue to ease but headline inflation will likely remain below 2% through the summer.
- Food price inflation hit a nearly 3-year high, with fresh vegetable prices rising double digits from a year earlier.
Headline inflation may have found its near-term bottom, but we don’t expect a lot of upward pressure in the coming months. That’s a bit of good news for Canadian households who, according to this morning’s retail numbers, have been reluctant to spend. Not only does low inflation mean their incomes will go further; steady core inflation will make for a patient Bank of Canada. That means less upward pressure on borrowing costs this year. Still, higher debt payments than in recent years will remain a headwind for consumer spending.
