This is despite the metric having recently shown signs of easing
Even though Canadian inflation has begun showing signs of easing, global price pressures will continue to make themselves felt for the foreseeable future, according to Priscilla Thiagamoorthy of BMO Economics.
“Canada’s inflation rate slowed for a second month, easing to +7% y/y in August on lower gasoline prices,” Thiagamoorthy recounted in a new analysis. “And, the average of the [Bank of Canada’s] three core measures dropped to 5.23% y/y from a revised record high of 5.43% in July. While inflation is showing signs of heading in the right direction, it’s still much too high for the BoC’s comfort.”
Read more: Is the Bank of Canada winning its war on inflation?
Improvements on the affordability front could give consumers a semblance of fiscal relief down the line, Thiagamoorthy added.
“New house prices in Canada climbed 6.9% y/y in August, marking the slowest pace since January 2021. This should help the inflation picture as this gauge feeds directly into the housing component of CPI.”
However, as expected, the US Federal Reserve implemented a 75-basis-point hike last week, which is likely to apply further pressure north of the border, Thiagamoorthy warned.
“Median projections for [US] personal consumption expenditure inflation are now: 5.4% in 2022 and 2.8% in 2023 (Q4/Q4). That’s higher than what was forecasted in June.”
