CAD: CPI inflation expected to decelerate to 1.1% in November - TDS

Analysts at TDS suggests that the Canada’s headline inflation is expected to decelerate to 1.1% y/y in November, reflecting a 0.5% monthly decline in consumer prices largely attributable to lower energy prices.

Key Quotes

“Our forecast assumes CPIX inflation stable at 1.7% y/y, which suggests the three new core measures likely landed in the lower end of the 1.5%-2.0% range given that the CPIX has tended to outperform in recent quarters. With regard to the new measures, we place greatest emphasis on the CPI-common which is the Bank of Canada’s implicit preferred measure in our view due to its high correlation to the output gap.”

“The CPI-common metric averaged a 1.5% y/y pace in Q3, so in addition to the November print, the overall monthly trend in previous months will be considered as well. A deceleration across the measures or any print below 1.5% y/y will add a downbeat tone to the release, reinforcing a dovish backdrop of below-target inflation, muted growth and elevated economic slack.”