October 16, 2019 / 1:16 PM / a month ago

Instant View: Canada September annual inflation rate holds at 1.9%

TORONTO (Reuters) - Canada’s annual inflation rate in September held steady at 1.9%, as gasoline prices continued to fall, Statistics Canada said on Wednesday.

STORIES:

Market reaction: CAD/

Link: here

COMMENTARY

ROYCE MENDES, SENIOR ECONOMIST AT CIBC CAPITAL MARKETS, IN A NOTE

“Canadian CPI flew in under expectations with airline fares reversing earlier gains that had been due to a methodological change. The headline index fell 0.4%, against expectations for a decline of 0.2% (both not seasonally adjusted). That still left the year-over-year pace at 1.9% since a similar pattern occurred last year. Furthermore, the Bank of Canada’s three core measures are still averaging a hair above 2%, with the core-common actually accelerating a tick to 1.9%. Overall, no significant implications for the Bank of Canada which we expect to remain on hold later this month.”

SIMON HARVEY, FX MARKET ANALYST FOR MONEX EUROPE AND MONEX CANADA

“The same as last month, this all looks like it’s driven by the energy sector. You strip out the gasoline change and headline inflation excluding gasoline is averaging at 2.4%. This is perfect for the Bank of Canada, it doesn’t really show any need for them to change tack with their current stance.”

“This reduces the probability of a Bank of Canada rate cut to become infinitesimal at the end of the month. And I think we can pretty much disregard a Bank of Canada rate cut for this year.”

NATHAN JANZEN, SENIOR ECONOMIST, ROYAL BANK OF CANADA

“The headline CPI inflation increase I think was a little softer than expected, but it looks like there were some big moves in some of the more noisy sub-components, so air fares declined pretty sharply month over month more than they did a year ago. When you strip out some of the volatility, the Bank of Canada’s core measures actually moved up slightly. So I think in terms of the underlying inflation backdrop this doesn’t really change anything, it still looks like underlying inflation trends are running right around the 2% rate.”

“No, I don’t think (this changes anything for the Bank of Canada) because those core measures are still pretty firmly around 2%, they and everyone else knows that the headline CPI numbers can be volatile month over month.”

Reporting by Moira Warburton and Fergal Smith; Editing by Denny Thomas

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