The implied odds of a Bank of Canada rate cut on June 4 have plunged to 36% from 65% following today’s CPI report. The main problem was that core measures rose 0.2-0.3 pp more than anticipated.
“Diverging signals within today’s inflation data produces a real dilemma for the Bank of Canada,” writes CIBC following the report.
They note that headline inflation fell because of the removal of the carbon tax but core measures accelerated.
“While we previously expected that a
renewed weakening within the labour market would bring a 25bp cut from the Bank of Canada at its June meeting,
that call now relies on next week’s GDP data suggesting that the economy is tracking towards contraction in Q2,” CIBC writes.
Food, rent and travel-tour prices were sources of rising price pressure.
USD/CAD is down 8 pips to 1.3942 today in choppy trade as Canada returns from a holiday.
This article was written by Adam Button at www.forexlive.com.
