CANADIAN INFLATION A NON-EVENT
The headline inflation rate did tick up to 1.9% YoY from 1.3% in December but this reflected soaring energy costs and the depressed base of a year ago (prices rose 0.3% MoM). The core came in tame at +0.1% MoM, but again base effects took the YoY trend up, to 2.0% from 1.5%. Once the base effects subside, look for the 3.5% output gap and the strong Canadian dollar to exert a renewed downtrend in coming months.
As for the Bank of Canada, all we can do is point to the article in yesterday's National Post - Tories Plan 'Specific' Spending Cuts in Budget - as a sign that if there is any tightening to be done this year, it will be in the realm of fiscal policy. And, the proposed stimulus pullback by a deficit-wary Federal government is going to take a whole lot of pressure off the Bank of Canada, in our view.
Read the summary of today’s report here.
Read the complete report here.
