Canada: CPI print makes another BoC hike this autumn very likely – Danske Bank

Mathias Røn Mogensen, Analyst at Danske Bank, explains that Canadian CPI figures rebounded to 1.2% y/y in July (consensus at 1.2%) on Friday, but remains below the Bank of Canada’s (BoC) forecast of 1.3% for Q3 17.

Key Quotes

“More importantly, the BoC’s preferred measure for core inflation rises further as the trimmed mean and median measures rises. The summer months have shown a significant change in the BoC’s rhetoric. As we entered summer, markets were pricing in a 25% probability of a summer cut (among other things on falling inflation). Meanwhile, as summer-end approaches, we have had an actual 25bp hike and the BoC’s communication highlights a strong belief in the output gap being closed soon, i.e. the belief in inflationary pressures rising eventually requires inflation disappointments before the BoC will stop its hiking cycle. Overall, Friday’s print makes another hike this autumn very likely.”