Another Downside Surprise in Canadian February CPI - Action Forex
Bottom Line: Building on the January CPI report that was already showing broad-based easing in price pressures in Canada, the February report today reaffirmed those trends. Different measures of core inflation all decelerated and the diffusion index that measures the scope of inflation pressures also improved. That measure however was still showing slightly broader price pressures than pre-pandemic “norms”, suggesting there’s still room for more improvement. Overall, we continue to expect a persistently soft economic backdrop to further slow inflation readings in Canada in the months ahead, allowing for the BoC to start lowering interest rates around mid-year.
Bottom Line: Building on the January CPI report that was already showing broad-based easing in price pressures in Canada, the February report today reaffirmed those trends. Different measures of core inflation all decelerated and the diffusion index that measures the scope of inflation pressures also improved. That measure however was still showing slightly broader price pressures than pre-pandemic “norms”, suggesting there’s still room for more improvement. Overall, we continue to expect a persistently soft economic backdrop to further slow inflation readings in Canada in the months ahead, allowing for the BoC to start lowering interest rates around mid-year.
