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Canada: Upside shock in inflation is more likely to deliver one other non-standard 50bp hike – CIBC


Information launched on Wednesday confirmed a bigger than anticipated enhance in inflation throughout March in Canada. In response to analysts at CIBC, the upside shock in inflation will doubtless be adopted by one other 50 bp price hike from the Financial institution of Canada on the subsequent financial coverage assembly. 

Key Quotes: 

“Inflation surged past everybody’s expectations in March, together with crucially the Financial institution of Canada’s current Financial Coverage Report (MPR) estimates. The 1.4% enhance on the month, and annual price of 6.7%, have been effectively prematurely of the consensus forecast (1.0% m/m, 6.1% y/y), and meant the common for Q1 was two ticks larger than the Financial institution’s MPR projections. That may doubtless imply rates of interest rise by one other 50bp on the subsequent coverage assembly.”

“Inflation continues to run effectively forward of expectations from earlier within the 12 months, linked not simply to commodity value spikes but in addition to stronger underlying value pressures as effectively. The upside shock is more likely to deliver one other non-standard 50bp hike from the Financial institution of Canada at it is subsequent assembly. Whereas March ought to signify the height in inflation because of the slight pullback in vitality costs from their highest level, any easing within the subsequent few months will doubtless be pretty gradual attributable to continued provide disruptions emanating from the warfare in Ukraine and lockdown measures in China. A extra significant deceleration in inflationary strain will doubtless wait till the second half of this 12 months and into 2023.”

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