04/18/2023
Canadian Inflation Falls To 4.3% year over year in March--Lowest Level Since August 2021!
Bottom Line from Sherry Cooper, Dominion Lending's Chief Economist:
The Bank of Canada is no doubt delighted that inflation continues to cool. The Bank expects price gains to reach 3% by midyear and return to near their 2% target by the end of 2024. But they said getting the prices back to 2% could prove more difficult because inflation expectations are coming down slowly, and service prices and wage growth remain elevated.
Governor Tiff Macklem, speaking at the IMF and World Bank meetings in Washington recently, said the Bank of Canada is prepared to end quantitative tightening earlier than planned if the economy needs stimulation. Quantitative tightening is the selling of government bonds on the Bank's balance sheet, which takes money out of the economy.
Macklem said his officials discussed hiking rates further during deliberations for the April 12th decision to continue to pause and reiterated that "it is far too early to be thinking about cutting interest rates."
According to Bloomberg News, swaps traders are now betting the Bank of Canada's next move will be a cut later this year. The governor pushed back on those expectations in a press conference this week. He and his officials discussed the possibility that rates need "to remain restrictive for longer to get inflation all the way back to target."
In a speech last month, Deputy Governor Toni Gravelle said quantitative tightening will likely end in late 2024 or early 2025. That marked the first time the Bank of Canada put a date on abandoning the program."
Great News On The Inflation Front The Consumer Price Index (CPI) fell sharply in March to 4.3% year-over-year, continuing a pattern of repeated declines. Before we break out the champagne, however, much of the drop in inflation resulted from the steep monthly increase in prices in March one year ago...
