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Canada March CPI +2.2% y/y vs +2.3% expected

Canada March 2021 inflation data:

  • Prior was +1.1% y/y
  • CPI +0.5% m/m % vs +0.6% expected
  • Prior m/m reading was 0.5%

Core measures (y/y):

  •    Median 2.1% vs 2.1% exp (prior 2.0%)
  •    Common 1.5% vs 1.4% exp (prior 1.3%)
  •    Trim 2.2% vs 2.0% exp (prior 1.9%)

The headline is fractionally soft but the core measures are moving up quickly and that’s what will get the BOC’s attention. In a normal period, a central bank would be thinking about true tightening right now but the central banking world has been captured by the idea that they can keep rates low for another two years without causing problems, even as Canadian house prices soar.

As for the report, base effects from March 2020 are a big factor here and that will continue in April/May. Excluding energy, CPI was up 1.1% y/y.

The report itself makes a big deal about base effects: “Users should consider the impact of base-year effects when interpreting the 12-month price movement in the coming months.”

USD/CAD has strengthened about 10 pips since the report but that also comes as oil prices are hitting session lows. Last at 1.2620.

The Bank of Canada rate decision is coming up at 1400 GMT (10 am ET). Here is a full preview.

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