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Canada CPI Inflation 2.9% y-o-y (consensus 2.9%) in Mar-24

- Canada's annual CPI inflation rate in March 2024 crept up to 2.9%, in line with market expectations, returning to the highest growth since December 2023.
- However, disinflation has left the current rate 0.42 percentage points below the one-year average while core measures kept slowing and to a surprising extent.

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

• The Bank of Canada's maintenance of the policy interest rate at 5% reflects its confidence in the ongoing effectiveness of monetary policy in controlling inflation amid an environment of gradually strengthening economic growth and easing inflationary pressures.
• With an upward revision in global and domestic growth forecasts and a notable easing in inflation, the Bank anticipates solid GDP growth this year and a continued approach towards the 2% inflation target, closely monitoring persistent inflationary pressures, especially in shelter costs and services.
• The Bank's future decisions on the policy interest rate will be heavily influenced by sustained evidence of core inflation easing, alongside a careful assessment of economic risks, including global tensions, housing market dynamics, and wage-productivity balances, underscoring a commitment to not prematurely ease monetary policy.

Canada CPI Inflation 2.78% y-o-y (consensus 3.1%) in Feb-24

- Canada's CPI inflation rate in February 2024 was 2.78% y-o-y, defying the consensus expectations for a rise to 3.1%.
- Underlying measures of inflation also slowed, indicating a relatively subdued inflationary environment.

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.