🇨🇦Cable FX Macro Weekly Note: Canada March CPI

**As seen in Risk In The Week report 04/14/23, subscribe at cablefxm.co.uk/reports

Headline prices in Canada dropped to 5.2% Y/y from the prior 5.9%, this was lower than the consensus median of 5.4%. The rate of inflation fell to lowest since January 2022, the deceleration was greatly attributed to energy prices which declined by 1.2% M/m. However, services prices rebounded to 0.4% M/m from a prior 0.1%, this translated into a 5.3% Y/y rise. Goods prices eased to 0.4% M/m vs a prior 1.0%, food prices slowed to 0.6% vs a prior 1.7%, the core figure came in at 0.5% M/m vs the prior 0.2%. While the downward move in the headline could be perceived as a sign of progress towards the BoC’s 2%-3% target, the core figure remains high as it increased by the highest monthly rate since September. Desks have pencilled Canada consumer prices falling to 2.4% Y/y by end of 2023, while the median survey sees the metric in the lower-end of the BoC’s target range as soon as 2Q 2024. We recently heard from the BoC as they left policy unchanged in April, RBC noted that the statement and the MPR leaned on the hawkish side. RBC said that getting from 3% to 2% might prove difficult as inflation expectations remain high, services prices keep rising, and wage growth proves steady. Analysts at TD Securities said that the overall inflation trend justifies a pause from the BoC, they noted that headline inflation could reach close to 3% Y/y by this summer and drop to target by 2H 2024. TD pencils rate cuts from the BoC by end of 2024, however, they pointed at a decline in labour market conditions and a slowdown in economic momentum as a pre-requisite for such actions.