Canada: CPI to stabilize at 1.7% y/y - TDS

Analysts at TD Securities are expecting Canadian CPI to stabilize at 1.7% y/y helped by base effects and higher core inflation.

Key Quotes

“We expect gasoline prices to decline by roughly 7% m/m following a 9% drop in November. Outside of energy, past CAD depreciation (-3% since October) which propped up import prices will underpin food and core (ex food and energy) prices this month, with the latter expected to firm to 1.9% y/y from 1.7%.”

“Overall we view risks as skewed slightly to the downside for this report. Our forecast, if realized, would also still leave Q4 CPI tracking at 1.9% y/y, below the BoC’s January MPR updated forecast of 2.0%.”

“Looking further, the past drop in oil prices and our revised commodity price outlook suggests headline inflation will remain below for most of 2019, rebounding back to 2% next December. This profile tracks below BoC forecasts, as highlighted in our January BoC commentary.”