By James Langton
(June 16 – 11:05 ET) – Canadian economists were a little surprised by this morning’s Consumer Price Index report. But they agree inflation remains tame.
While the headline inflation rate grew faster than expected in May, by adjusting for seasonal increases in gas, hotels and other summertime price hikes, economists say that inflation is well under control. BMO Nesbitt Burns chief economist Sherry Cooper says
“it’s clear that Canada1s inflation story remains centered largely on oil.”
Cooper also notes a few other price pressures coming from food and mortgage rates, but otherwise she seems generally comfortable with current inflation. “With the core reading safely below the mid-point of the Bank of Canada’s 1%-to-3% target band, Thiessen and Company have little reason to pursue a more aggressive tightening course than the Fed.”
CIBC World Markets economists concur with Cooper, noting that mortgage rates are applying some pressure, “but even then there1s still a long road to the 2% mid-point of the Bank of Canada1s target range, and we likely won1t get there until early 2001.” CIBC maintains that the Bank may be looking for excuses to hike rates when the Fed next does the deed. “The Canadian dollar should provide those excuses, weakening on doubts that the Bank of Canada needs to match the Fed pound for pound.”
RBC DS Capital Markets Research is the mosty optimistic, noting that current inflation readings combined with evidence of slowing in the U.S., “will likely keep the Bank on hold this year.”