• Canadian headline inflation slows down in September

    Source: FxWire Pro - Commentary / 19 Oct 2018 16:04:11   Europe/London

    Canada’s consumer price inflation decelerated in the month of September, coming in below consensus expectations. On a year-on-year basis, the headline inflation decelerated to 2.2 percent from August’s 2.8 percent, as compared with consensus expectations of 2.7 percent. Adjusted for seasonal patterns, prices dropped 0.1 percent sequentially.

    The deceleration in the headline rate was mainly driven by transportation prices, which alleviated to 3.9 percent from August’s 7.2 percent. Gas price growth fell to 12 percent year-on-year from August’s 20 percent, but the biggest move was air transportation, which went to 7.4 percent from 26.4 percent. Together, these two items took 0.5 percentage points from the headline reading.

    The Bank of Canada’s core measures dropped by one tenth of a percentage point, with CPI-trim falling to 2.1 percent, CPI-median to 2 percent and CPI-common to 1.9 percent.

    In the past few months, inflation has been volatile, but the signal beneath the noise is an underlying rate close to the central bank’s 2 percent target, noted TD Economics in a research report. The relative stability of the Bank of Canada’s core measures is in line with an economy operating close to potential. The Bank of Canada can carry on with its risk management framework without any urgency.

    “As mortgages reset to higher rates, debt service costs will eat into household disposable income, weighing on credit growth and consumer spending in the years ahead and auguring for caution from the central bank”, added TD Economics.

    At 14:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was bearish at -94.9759, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 6.5728. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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