Canada: Headline CPI is running at a hot 4.4% annualized rate over the past three months – NFB
|Inflation data from Canada released on Wednesday, showed larger-than-expected numbers. According to analysts at the National Bank of Canada, price pressures are mounting in Canada but they think is a transitory phenomenon.
Key Quotes:
“Canada’s consumer price index rose 0.5% in May (not seasonally adjusted), one tick above consensus expectations.”
“Although less acute than south of the border, price pressures are also mounting in this country. While annual figures continue to be upwardly impacted by positive base effects, recent momentum also raises eyebrows. Headline CPI is running at a hot 4.4% annualized rate over the past 3-months.”
“In light of this strong recent momentum, one could ask if there could be persistence in price pressures or if this is rather a transitory phenomenon. We are part of the former camp. In the short-term, the reopening of industries negatively impacted by COVID-19 alongside extraordinary income support programs that are still in place could create artificial labor shortages contributing to sticky inflation. As a reminder, households have accumulated a sizable 10% of GDP in excess savings in the last 5 quarters which could lead to a spending bonanza while supply constraints are still at play.”
“In the long-term, we continue to see this cycle as much more conducive to above-target inflation. Both monetary and fiscal policy are expected to stay very stimulative for some time and protectionism/deglobalization as well as the ecological transition are suggesting a regime change for inflation. In sum, we are still seeing underlying inflation in the upper band of the central bank target range in 2021 and 2022.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.