**As seen in Risk In The Week report 05/12/23, subscribe at cablefxm.co.uk/reports
Canada consumer prices dipped by almost 1.0 percentage point to 4.3% Y/y in March, this was in line with market estimates. The BoC’s measure of core prices eased to 4.5% Y/y from the prior 4.85% as the median CPI measure printed at 4.6% Y/y. Some notable developments were seen in gas prices, March recorded a 13.8% Y/y decline, this was the largest drop since 2020. Also, mortgage costs jumped by 26.4% to set another record high. On a monthly basis, prices excluding food & energy accelerated by a faster pace for a third consecutive month, the measure increased by 0.6% M/m. Food prices eased to 0.2% from the prior 0.6% M/m, shelter prices accelerated to 0.4% from the prior 0.2% M/m. Broadly speaking, inflation measures have moved closer to the BoC’s target, however, the central bank has been slow to express less concern as it sees a lengthy easing. Also, a resilient labour market could be pressuring wages ahead. Despite tightening in monetary conditions, we have not seen cracks in the jobs front, headline jobs numbers have topped the median survey every month since October. The median projection sees Canadian CPI falling within the BoC’s target by end of the year, however, Scotiabank expects it to remain more resilient as they pencil headline prices at 3.2% by 4Q 2023. Looking ahead, most economists see headline CPI falling to 2.1% by end of 2024. Analysts at RBC project April inflation falling to 4.1% Y/y, they noted a 6% increase in gasoline prices on the month, however, analysts saw a slower increase in grocery prices. RBC added that calendar effects should see the BoC’s core and super core measures slowing down significantly in April.
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