Canadian Dollar: Higher Inflation To Support Speculation For Rate Hike
The BoC has shown an increased willingness to normalize policy further this year as the central bank sees the growth rate expanding 3.7% in 2010 amid an initial projection for a 2.9% rise in GDP, and higher inflation accompanying the rebound in economic activity will certainly give the governing board scope to raise borrowing costs as it aims to balance the risks for the economy. Consumer prices are anticipated to rise 0.2% in April after unexpectedly holding flat in the previous month, while the headline reading for inflation is expected to rebound to 1.7% after slipping to an annualized pace of 1.4% in March. In addition, the core rate of inflation is projected to tip 0.1% higher during the same period after contracting 0.2% in the month prior, with prices excluding volatile items such oil and transportation costs forecasted to increase 1.8% from the previous year, and mounting price pressures could add to expectations for a rate hike in May as inflation approaches the 2% target.
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