Back
27 Feb 2015
BOC likely to remain on hold at next week’s meeting - Nomura
FXStreet (Bali) - Charles St-Arnaud, US Economist at Nomura, notes that Thursday's Canadian inflation figures showed lower gasoline prices pushing total inflation lower, but food prices prevented a moderation in core.
Key Quotes
"Overall, the report shows subdued inflationary pressures, once food prices are excluded. As such, food prices are the main contributor to inflation and are responsible for 0.75pp of the 1.0% headline inflation. Headline inflation is moderating rapidly as a result of the fall in gasoline prices."
"As a result, we believe headline inflation is likely to be very close to 0% by March and could even fall into negative territory"
"After a period when core inflation has been above 2%, we believe core inflation is set to moderate in the coming months owing to a base effect and weaker inflationary pressures because of a rise in excess supply and some mild second-round effects from lower oil prices and the exchange rate pass-through. However, continued strength in food inflation could limit that moderation in core inflation."
"We believe inflation is unlikely to be the primary focus of the Bank of Canada (BoC) in the coming months, as it remains concerned about the negative impact on the economy of the drop in oil prices."
"As such, indicators of the strength of the non-energy sector, especially exports, or signs of contagion to regions or industries not related to oil are more important. We believe the central bank is likely to remain on hold at next week’s meeting but still think that another rate cut will be necessary in the coming months
Key Quotes
"Overall, the report shows subdued inflationary pressures, once food prices are excluded. As such, food prices are the main contributor to inflation and are responsible for 0.75pp of the 1.0% headline inflation. Headline inflation is moderating rapidly as a result of the fall in gasoline prices."
"As a result, we believe headline inflation is likely to be very close to 0% by March and could even fall into negative territory"
"After a period when core inflation has been above 2%, we believe core inflation is set to moderate in the coming months owing to a base effect and weaker inflationary pressures because of a rise in excess supply and some mild second-round effects from lower oil prices and the exchange rate pass-through. However, continued strength in food inflation could limit that moderation in core inflation."
"We believe inflation is unlikely to be the primary focus of the Bank of Canada (BoC) in the coming months, as it remains concerned about the negative impact on the economy of the drop in oil prices."
"As such, indicators of the strength of the non-energy sector, especially exports, or signs of contagion to regions or industries not related to oil are more important. We believe the central bank is likely to remain on hold at next week’s meeting but still think that another rate cut will be necessary in the coming months