🇨🇦Cable FX Macro Weekly Note: Canada Aug. CPI

**As seen in Riks In The Week Report 09/16/2022, cablefxm.co.uk/reports

Canada headline prices came in at 7.6% Y/y in July, this was in line with estimates and a slowdown from the previous 8.1%. The M/m metric showed a rise of 0.1%, down from previous 0.7%, while the headline showed signs of easing as gas prices dropped the most since April 2020, the core metric jumped to 5.3% Y/y, the highest reading on record. On a monthly basis, the core reading accelerated at 0.6%, shelter came in at 0.4%, food recorded a 0.9% rise. Recreation printed the largest increase in July at 1.4%, gasoline posted a 9.2% M/m decline. Services inflation jumped by 5.7% Y/y, goods prices recorded a 9.6% Y/y increase. Ontario and Quebec prices came in at 0.1% and -0.1% M/m, the largest decline was seen in New Brunswick, the largest increase was posted in Whiterhorse, however, these two regions represent less than 2% weight in the StatCan CPI index. The average of the BoC’s core inflation metrics ticked higher to 5.30% Y/y from 5.23%, trim and median core gauges slowed while the common accelerated to 5.5% from 5.3%. Hours after the release, a BoC’s Governor Macklem opinion piece was published where he welcomed the CPI slowdown but stated it will take more time to bring inflation back to target. The desk at TD Securities noted higher food and fuel prices had filtered into the services sector and said this tends to have ‘stickier’ dynamics. TD reminds us that the BoC is reluctant to offer guidance in the rate-hike cycle, they won’t stop until inflation is back to 2%, and if this materializes, the desk points to a 50% chance of a recession in Canada. The desk at UBS said that the Canadian economy has been slowing down faster than the U.S. economy, the bank will be looking at next week’s data to assess the magnitude of the BoC’s rate hike in October, UBS sees the central bank moving by 50bps.