Canada: Headline inflation could well accelerate again in May – CIBC
18.05.2022, 16:42

Canada: Headline inflation could well accelerate again in May – CIBC

Data released on Wednesday showed the annual inflation rate rose to 6.8%, the highest level since January 1991. Analysts at CIBC point out inflation could rise further in May before starting to slowdown during the second half of the year. 

Key Quotes: 

“There's no respite yet for Canadian consumers when it comes to inflationary pressures. Headline CPI accelerated further to 6.8%, from 6.7% in the prior month and against consensus expectations for an unchanged reading. Moreover, with gasoline and agricultural prices still on the rise, headline inflation could well accelerate again in May before finally starting to slow in the second half of the year and into 2023.”

“Some like it hot, but not the Bank of Canada when it comes to inflation. The fact that inflation is pushing further above the Bank's MPR forecasts virtually guarantees another 50bp hike at its next meeting, and it could well follow that up with another outsized move to get the overnight rate to the bottom end of its neutral range (2-3%) quickly. However, after that, signs of a slowing in the domestic economy and home-grown inflationary pressures should slow down the pace of rate hikes, and we still suspect that the Bank won’t have to take rates above 2.5% in order to slow growth enough to bring inflation down to its 2% target in 2023.”

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