(July 13 – 11:20 ET) – Canada’s CPI surprised on the upside this morning, coming in at 2.9%, up from 2.4% and well ahead of estimates for 2,7%. However since all the gains were centered on energy prices most economists are shrugging off the result.
Sherry Cooper, chief economist at BMO Nesbitt Burns Inc., says there is, “Nothing overly shocking in this report, however, with energy still the overwhelmingly dominant theme”. She points out that the core rate remained subdued, and well below the 2% limit targeted by the Bank of Canada.
Economists at CIBC World Markets are cautious however, noting that “Forward-looking markets may be getting more worried about Canadian inflation,” with utilization rates and employment both very strong. They suggest that the energy shock is going to start showing up in core prices in coming months, with mortgage rates leading the way. However they don’t expect it to hit the bank’s limit until early 2001.
RBC Dominion Securities Inc. economists are a little more dovish. They see the economy slowing in the second half, easing pressure on prices.