Canada\u2019s Consumer Price Index (CPI) dropped to 2.8% year-on-year in June, down from 3.4% in May and below the consensus forecast of 3.0%.
Canada’s Consumer Price Index dropped to 2.8% year-on-year in June, down from 3.4% in May and below the consensus forecast of 3.0%.. The average of two of the Bank of Canada’s core measures ofCore CPI excludes food and energy items and is considered more important than headline CPI.
The good news is that inflation has finally dropped to within the Bank of Canada’s target range of 1%-3%. However, core CPI has been more persistent than expected and remains above the target range.The central bank would like to pause hiking at the next meeting in September, but that will depend on key economic data, particularly inflation and employment. The money markets are expecting a pause in September and have priced in the probability of a rate hike at 20%.
Inflation is moving in the right direction but remains well above the Reserve Bank of New Zealand’s target of 2%. The central bank has hiked by 525 basis points in the current rate-tightening cycle but may need to tighten further in order to bring inflation closer to target. The RBNZ meets next on August 16The UK, which boasts the highest inflation of any G-7 country, finally had something to cheer about today, with a better-than-expected inflation report.
In June, CPI fell to 7.9% year-on-year, sharply lower than the 8.7% gain in May. Core CPI declined slightly to 6.9%, down from the May reading of 7.1%, which was a 31-year high. The drop in headline inflation is certainly encouraging, but the core rate has proven to be stickier than expected, and the Bank of England likely will have to continue raising rates in order to bring down inflation closer to its 2% target.In the Forex market, the positive inflation reports sent the Canadian dollar slightly higher but pushed the New Zealand Dollar and British Pound lower.
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