Canada: Inflation to undershoot BOC's Q4 forecast of 7.1% y/y – TDS

TD Securities analysts noted that a sufficiently weak growth context in late 2022 and early 2023 might be enough to keep the Bank of Canada (BOC) on hold in January. Analysts, however, added that the latest inflation data should ever so slightly ratchet up the pressure on the BOC.

BOC will find cause for concern in inflation data

"CPI inflation decelerated slightly to 6.8% y/y in November versus a market consensus estimate of 6.7% y/y, as prices rose 0.1% on month-over-month basis. Food prices were the largest positive contributor with prices increasing by 1.2% m/m, while gasoline prices were the most notable downward contributor after dropping by 3.6% in November."

"Inflation is likely to undershoot the BoC's Q4/Q4 forecast of 7.1% y/y, but the Bank will still find cause for concern in the data. Most notably, core CPI metrics firmed slightly with the weighted median measure rising from 4.9% to 5.0% y/y, which points to persistent underlying inflationary pressures."