‘They’ve still got this very stable inflation backdrop as an ace up their sleeve, which suggests there’s no rush for the bank to move.’ – Doug Porter, BMO Capital Markets
Canadian inflation rose for the second consecutive month in February, matching market forecasts. Statistics Canada reported that the Consumer Price Index advanced 0.2% in February, following the preceding month’s 0.9% surge and meeting analysts’ expectations. Back in 2015, the Bank of Canada cut its key interest rates twice amid low oil prices that hurt badly the Canadian economy. However, analysts suggest that stronger economic growth, rising inflation and higher oil prices will probably force the Bank to raise rates in the Q2 of 2018, when the economy fully recovers. Food prices and telephone services prices dropped 2.3% and 2.2%, respectively, compared to the same month a year ago. Meanwhile, the price of gasoline jumped 23.1% from a year earlier. Excluding gasoline, year-over-year inflation was just 1.3%. Earlier this month, the BoC said that higher inflation was more affected by temporary factors, such as changes in petrol prices, adding that underlying inflation remained subdued. Data also showed that the Common CPI, the Central bank’s preferred inflation measure, came in at 1.3%, solidly below the BoC’s inflationary target of 2%. In the meantime, the Median CPI, another measure of the underlying inflation trend, remained at 1.9%.
