June 17, 2020 / 1:00 PM / 15 days ago

Instant View: Canada's May inflation rate falls 0.4% on lower gas prices

TORONTO (Reuters) - Canada’s annual inflation rate in May fell 0.4% as lower transportation prices, mainly because of gas prices, outweighed higher food costs, Statistics Canada said on Wednesday.

STORIES:

Market reaction: CAD/

Link: here

COMMENTARY

DEREK HOLT, VICE PRESIDENT OF CAPITAL MARKETS ECONOMICS AT SCOTIABANK

“It’s a little bit lower for the core on all three components but I think the market is largely looking past it. It’s backward looking, the Bank of Canada has already moved its policy levers. The full lagging adjustment on inflation is still probably ahead of us. And we heard (Bank of Canada governor Tiff) Macklem say yesterday that he basically doesn’t believe the data because the basket is no longer representative.”

ANDREW KELVIN, CHIEF CANADA STRATEGIST AT TD SECURITIES

“This was quite a bit weaker than expected. We did see the core measure fall. That suggests there is still a little bit more slack in the economy than forecasters than expected or hoped.”

“The hit to aggregate demand has been so large that these sort of minute variations in data… won’t change (the Bank of Canada’s) policy stance at all. We need to see so much improvement before we start talking about reducing the amount of quantitative easing in the economy, for example.”

“We were never likely to see interest rates move higher until sometime in 2022. We were likely to see quantitative easing into 2021. I don’t think this has near-term implications.”

JOSH NYE, SENIOR ECONOMIST, RBC

“Headline CPI was a bit softer than expected in May... so further decline relative to April. We know gasoline prices increased in the month but that seemed to be offset by price decline in a number of categories. We continue to see softer inflation in a lot of the things that Canadians are buying less of - travel services, that type of thing... Retailers are needing to lower their prices to encourage consumers to come out a bit more and spend their money, and that disinflationary pressure is likely to remain in place for an extended period.”

“Today’s reading was softer than expected but very much in keeping with an expectation that inflation is likely to remain below the Bank of Canada’s 2% target, and that’s going to require ongoing policy stimulus from the Bank of Canada.”

Reporting Nichola Saminather, Moira Warburton and Fergal Smith; Editing by Denny Thomas

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below