**As seen in Risk In The Week report 05/20/24, subscribe at cablefxm.co.uk/reports
Canada March consumer prices rose 2.9% Y/y, a touch faster than the prior 2.8% and in line with the consensus forecast. The core CPI metric slowed to 2.0% Y/y from the prior 2.1%, median core CPI ticked at 2.8% and the trimm core CPI recorded a 3.1%. A measure of prices excluding shelter rose faster at 1.5% Y/y from 1.3% in February. Statistics Canada said the components leading the rise in March were gas prices and shelter costs on a year-over-year basis. Despite the uptick in headline prices, metrics are seen in the BoC's target range, and this report didn't move the dial for the central bank. The BoC has held to rate cut expectations if the disinflation progress remains intact. Economists do not expect prices to move much faster over the second quarter, the consensus median sees inflation rising at 2.7% Y/y, according to data compiled by Bloomberg.
Strategists at Morgan Stanley noted the three-month average of CPI-Trim and CPI-Median slowing from 3.4% in December to 1.3% in March as evidence that the Canadian economy has progressed on inflation this year. The desk added that it is not easy for a central bank to move ahead of the Fed but the BoC is in a good position to start easing in July. Morgan Stanley pencils in four 25bps rate cuts from the BoC this year before reaching a terminal rate of 2.50% in 2025. Economists at CIBC see April headline CPI slowing to 2.7% Y/y from 2.9%, they noted a sharp rise in gasoline prices but a continuation of easing in food price inflation. CIBC thinks the recent soft trend in core measures will likely open the door for a BoC June rate cut.
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