TD Securities analysts expect Canadian headline CPI to slow to 1.9% year-on-year in February, with softer core measures leaving inflation below Bank of Canada projections. However, they stress that this softer path matters less near term given Iranian conflict–driven Oil upside. A weak February jobs report reinforces a softer domestic backdrop even as higher WTI keeps global factors dominant for the Canadian Dollar.
Canada data soft but Oil dominates
“We look for headline CPI to slow by 0.4pp to 1.9% y/y in February (mkt: 1.9%) as prices rise by 0.7% m/m, underpinned by higher fuel prices and seasonal tailwinds.”
“Softer core inflation measures should add to the dovish tone, with CPI-trim/median forecast to slow 0.1pp to 2.3%/2.4% (in line with the mkt), which if realized would leave both headline and core CPI tracking below Bank of Canada projections from the January MPR.”
“However, that softer trajectory is less relevant for the near-term policy outlook with the ongoing Iranian conflict and the upside risks to inflation from higher crude oil prices.”
“CAD employment surprised sharply to the downside with 84k jobs lost in February, building on the 25k decline last month as the unemployment rate rose by 0.2pp to 6.7%.”
“This report takes some shine off recent labour market strength and reinforces the softer domestic backdrop heading into the March Bank of Canada meeting, even if it won’t have as much impact on the Bank’s deliberations with the upside risks from higher oil prices.”
“We continue to be biased selling Canada vs the US in 10s, and see the move as a good opportunity for entry.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)