BCREA ECONOMICS NOW
Canadian Consumer Price Inflation - April 20, 2012
Canadian CPI inflation registered 1.9 per cent (year-over-year) in March, a 0.7 point decline from February inflation of 2.7 per cent. The rise in consumer prices was slowed by more moderate growth in food and energy prices in March. The Bank of Canada's core inflation measure, which excludes food and energy prices, rose 1.9 per cent in March, down from 2.3 per cent in February. Consumer prices in BC were 1.6 per cent higher in March (year-over-year), down slightly from 1.7 per cent in February.
The Bank of Canada made sure to emphasize the firmness of inflation thus far in 2012 in its interest rate decision early in the week. Today's CPI report confirms that core inflation, though lower this month, is still anchored very close to the Bank's target of 2 per cent. Stronger than expected economic growth in the first half of 2012, and better outcomes in the Canadian labour market, may put upward pressure on core prices which will further buttress the Bank's case for raising interest rates later this year.
For more information, please contact:
Cameron Muir Brendon Ogmundson
Chief Economist Economist
Direct: 604.742.2780 Direct: 604.742.2796
Mobile: 778.229.1884 Mobile: 604.505.6793
Email: cmuir@bcrea.bc.ca Email: bogmundson@bcrea.bc.ca
BCREA Blog
-
What a difference a day makes
It is always wise, when gauging market expectations, to remember that the market reserves the right to change its mind and sometimes does so very quickly. To illustrate, here is a chart comparing market expectations of the probability of a 25 basis points change in the Bank of Canada overnight rate by the end of 2012 - observed before and after the latest Bank interest rate decision.
From this chart we can discern that the market believes it is three times more likely that the Bank will raise interest rates before the end of the year, than it did the day before the Banks’ announcement.
Of course, in terms of impact on the economy or the housing market, it is trivial whether the Bank of Canada decides to raise rates in December or waits a month or two longer. What is important is that the Bank is signalling that its preference is for higher interest rates relatively soon. That preference in turn should translate to an increase in long-term interest rates including mortgage rates, that is, unless something happens to change the markets mind.
