Canada: Central bank to remain on the sidelines despite CPI data – NFB

The Consumer Price Index in Canada dropped 0.4% in September and rose 1.9% from a year ago, both numbers came in below expectations. Jocelyn Paquet, an analyst at the National Bank of Canada points out that inflation numbers combined with those of the labour market should keep the Bank of Canada on the sidelines. 

Key Quotes:

“Headline CPI surprised on the downside in September but the decline was far from widespread with only three categories seeing lower prices in the month. In the transportation segment, prices fell on lower gasoline prices.”

“Looking at year-on-year data, headline inflation continued to be hampered by a double-digit drop in pump prices (-10.0% y/y). Excluding gasoline, prices were up 2.4%. In contrast with the headline print, the core measures preferred by the Bank of Canada were slightly stronger than expected, with the average of the three gauges coming in at a cyclical high of 2.1%, up one tick from August. This, combined with a buoyant labour market in the country, should keep the Bank of Canada on the sidelines for a while.”

“Keep in mind that in its July Monetary Policy Report, the central bank had anticipated headline inflation to average 1.6% in Q3. Instead, prices climbed 1.9% in the quarter.”