High Inflation Rates In Canada Give Room For The Bank Of Canada To Hold Interest Rates
May Inflation rate in Canada, was the highest in last seven years. The increase in prices of all the eight major components like food, shelter and transport has led to a sudden jump in the May CPI. This hike in CPI gives ample scope for the Bank of Canada to hold the interest rates steady.
The median economic forecast for the rise in consumer price index was 2.1%, however it has increased by 2.4% when compared to last year. The rise is boosted by the increase in prices of food and consumer durables. The core inflation raised to 2.07%, which is the highest since February 2012.This sudden jump in inflation led to an increase in the rate of Canadian dollar. It has risen by 0.65% and is trading close to 0.75 cents to the USD. This news supports the Bank of Canada’s view that the economy is reviving back from the slowdown. Contrary to the views of his counterparts in U.S. and Europe, Governor Stephen Poloz opines that the interest rates must move higher.
Here are some interesting news from experts at Knightsbridge FX about the consumer price index.
- The current figures of 2.7% increase in consumer price index are far higher than the central Bank’s quarterly forecast. The central banks original forecast was 1.7%, which was raised to 1.9% in April, 2019.
- The increase in consumer Price Index (CPI) was 0.4%, on a monthly basis. The pace matches with that of April and tops the median forecast by 0.1%.
- The common core CPI is at 1.8%, median core CPI is 2.1% and trim core CPI is 2.3%.
- The major boost for the rise in CPI comes from housing sector. The shelter costs rose by 2.7% on an annual basis. Food and transportation also played a major role in driving the CPI upwards.
- The CPI of June is as per the expectations of the Bank of Canada and supported the Bank’s neutral stance on monetary policy.
The experts Knightsbridge FX have a neutral bearish view on the USD/CAD trading rate for the short term. They state that the rate of USD/ CAD may remain range bound in the near future.
