Canada: Inflation is easing, but BoC will likely rise one more time – CIBC

Data released on Tuesday showed lower-than-expected inflation numbers in Canada. Analysts at CIBC point out the report was largely as anticipated and therefore, they continue to expect the Bank of Canada to raise rates by 25 bps next week before pausing for the rest of the year.

Looking through mortgage costs

“The BoC's core measures CPI-median and CPI-trim also decelerated by one tick to 5.0% and 5.3% respectively, after being revised up in the prior month. While core inflation remains too high, when excluding the increase in mortgage interest costs, which reflect the rapidly rising interest rates, things look better with a monthly gain of about 0.2%. Overall, this report is largely as anticipated and we therefore continue to expect the Bank of Canada to raise rates by 25 bps next week before pausing for the rest of the year.”

“The good news is that inflation is easing, and that will become more noticeable when the big monthly increases seen this past spring start to drop out of the annual calculation this year. Moreover, core inflation excluding mortgage costs is growing at a pace much closer to target. However, given the strong December job's report and tightness in the labour market, that likely won't be enough to deter the Bank of Canada from raising rates 25 bps one last time next week.”