Core Inflation Rate = 4% vs 3.5% (Estimate)
Inflation Rate YoY = 4.8% vs 4.8 (Estimate)
Canadian CPI has arguably become one of the most intriguing data points of 2022 thus far, not far behind the US inflation print because markets currently expect as many as six rate hikes this year – that’s two more than the Fed and Bank of England (BoE).
Canadian CPI
Source: DailyFX econ calendar,
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Overly hawkish expectations can prove to be misguided, as we saw in November of last year when the Bank of England decided against a rate hike despite markets having already priced one in. The Pound subsequently dropped as markets recalibrated future expectations.
Highlights of the Report from Statistics Canada:
- On a monthly basis, the CPI fell 0.1% in December, following a 0.2% increase in November. This was the first monthly decline since December 2020, as gasoline prices fell in response to lower demand amid the spread of the Omicron COVID-19 variant.
- Prices rose in all eight major components on a year-over-year basis in December. Transportation and shelter prices contributed the most to the increase in the CPI.
- YoY, prices for services rose at a faster pace than on December when compared to November.
- Statistics Canada
USD/CAD Immediate Reaction
USD/CAD dropped slightly after the release of the data but has since then recovered to levels seen just before the release. All eyes now shift to the BoC meeting next Wednesday where markets have priced in nearly 90% of a 25 basis point hike.
Source: IG
--- Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
