Canada's CPI inflation data will influence the Bank of Canada's rate cut schedule. Commerzbank economists analyze BoC's options as disinflation in Canada appears to have stalled.
No signs of deflation in sight
Inflation does not subside. Whether today's January figures change this situation seems questionable to say the least. After all, most of the rise in interest rates should have already passed through to the real economy, which would mean that most of the disinflationary effect should have occurred. Economists surveyed by Bloomberg also expect a slight improvement at best.
These prospects are not particularly good for the BoC. If inflation doesn't continue to fall unexpectedly in the coming months, you have only unpleasant options left. Either you raise rates again (which is unlikely at the moment and would increase the risk of recession), or you have to wait for the economy to slow down further, i.e. you have to go into recession with your eyes wide open to break inflationary pressure once and for all. Another possibility is that it cuts interest rates despite the evolution, risking not only consolidating inflation, but even a rebound., which certainly wouldn't be useful for CAD. Let's hope that doesn't happen.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
