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Canada Policy Interest Rate 5.0% (consensus 5.0%) in Mar-24

• The Bank of Canada's decision to hold the policy rate at 5% aligns with economic consensus. It was influenced by a global economic slowdown, easing inflationary pressures, and modest domestic growth below potential.
• Despite CPI inflation moderating to 2.9%, concerns over persistent core inflation and elevated shelter costs underscore the need for continued vigilance. The Bank anticipates inflation to stay close to 3% in the near term before gradually easing, with a full return to the 2% target expected by 2025.
• The Bank remains open to adjusting the policy rate if inflationary surprises occur. Its current focus is on monitoring wage growth, demand-supply balance, inflation expectations, and corporate pricing behavior. The decision process incorporates domestic conditions and global economic dynamics, ensuring readiness to act to maintain price stability.

Canada CPI Inflation 2.86% y-o-y (consensus 3.3%) in Jan-24

- Canada's CPI inflation grew by 2.86% on a year-on-year basis in January 2024, falling far short of the consensus forecast of 3.3%. It represents the lowest growth rate since June 2023.
- Core inflation measures were also weaker than expected, but only by about 0.2pp, leaving half of the downside news as non-core.

Bank of Canada (consensus 5%) in Jan-24

• The Bank of Canada's no-change decision aligns with the economic consensus amid a global economic slowdown and domestic stagnation, with growth in Canada expected to remain subdued into early 2024.
• Despite CPI inflation easing, concerns over persistent shelter cost inflation and lack of significant declines in core inflation measures underpin the Bank's decision to maintain the policy rate at 5%.
• The Bank's policy stance is shaped by the need to balance demand and supply, with a close watch on inflation expectations and wage trends, indicating a readiness to adjust the policy rate if inflationary pressures do not subside as anticipated.

Canada CPI Inflation 3.4% y-o-y (consensus 3.4%) in Dec-23

- Canada's annual CPI inflation rate increased to 3.4% in December 2023, aligning with market expectations, but remains moderate relative to recent averages.
- Although core inflation slowed further, the median and trimmed mean measures surprised to the upside by 0.2pp.