📝 Broad Inflation Pressures Reaccelerated In August: RBC

Broader inflation pressures showed signs of reaccelerating in August. The BoC's preferred CPI-trim and CPI-median measures rose more than expected on a year-over-year basis (to 3.9% and 4.1%, respectively) and the closely-watched more recent 3-month run rate accelerated to a 4 1/2% annualized rate for both. CPI trim services ex-shelter (sometimes called BoC 'supercore') rose 4.3% at an annualized rate over the last three months (by our calculation), in line with the July increase. 

One silver lining was that grocery price growth showed further signs of easing. Grocery prices were still up 6.9% year-over-year, but that was smaller than the 8.5% increase in July and the 11%+ readings last winter. Food price growth should continue to ease in the near-term as lower raw food commodity prices and easing domestic supply chain pressures pass through to retail prices with a lag.

BoC has one mandate, and that is to target a 2% inflation rate. And the August CPI data took a significant step away from that target rather than towards it. We expect the economic backdrop will continue to soften, and don't look for more interest rate hikes this year. But the central bank won't hesitate to hike interest rates further if inflation pressures don't show signs of easing

- RBC

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