Back
23 Jan 2015
Canadian CPI eyed - RBS
FXStreet (Bali) - Today's Canadian CPI data may give the BoC scope to leave its “insurance” rate cut in place, notes the FX Strategy Team at RBS.
Key Quotes
"After the Bank of Canada’s surprise rate cut earlier this week, Canada’s December CPI is released. The Bank’s decision to lower its benchmark rate despite leaving its core inflation profile largely unchanged in the January forecast round is a strong signal of how the bank believes the direction and risks to core inflation favour an undershoot, rather than overshoot, of target over the medium term."
"Lower energy prices may push headline inflation back below the 2.0% midpoint target in December, and the consensus for core shows a small decline in the y/y core rate is anticipated – giving the bank scope to leave its “insurance” rate cut in place. Because the Bank of Canada’s decision to cut rates this week was explicitly a “hedge” against lower energy prices and the second-hand impacts of lower energy prices on growth, we expect CAD price action to become more closely linked with oil prices."
Key Quotes
"After the Bank of Canada’s surprise rate cut earlier this week, Canada’s December CPI is released. The Bank’s decision to lower its benchmark rate despite leaving its core inflation profile largely unchanged in the January forecast round is a strong signal of how the bank believes the direction and risks to core inflation favour an undershoot, rather than overshoot, of target over the medium term."
"Lower energy prices may push headline inflation back below the 2.0% midpoint target in December, and the consensus for core shows a small decline in the y/y core rate is anticipated – giving the bank scope to leave its “insurance” rate cut in place. Because the Bank of Canada’s decision to cut rates this week was explicitly a “hedge” against lower energy prices and the second-hand impacts of lower energy prices on growth, we expect CAD price action to become more closely linked with oil prices."