Canada January inflation rate seen easing to 2.3 percent
WHAT: Canada’s consumer price index for January
WHEN: Friday, February 18, at 7 a.m. ET
FACTORS TO WATCH:
Economists predict the annual rate for headline inflation will ease in January, confirming that price pressures are not a concern for Canadian policy makers.
Gasoline prices, food, housing furnishings and health services are expected to exert upward pressure on the consumer price index.
But core inflation, which excludes volatile items like gasoline and some food items, should remain subdued at 1.5 percent.
Analysts say the price hikes on gasoline and other energy items such as home heating oil are unlikely to persist through 2011.
The Bank of Canada projects total inflation of 2.2 percent at annual rates in the first quarter of this year compared with 1.4 percent for core inflation.
It projects both measures of inflation to converge at its target of 2 percent by the end of 2012.
Bank of Canada Governor Mark Carney told Reuters on January 27 he saw little risk of inflationary pressure in Canada from rising global food prices and that he was “quite comfortable” with his stance on interest rates.
If inflation remains tame, it is highly unlikely to be a major factor shaping the Bank of Canada’s next interest rate announcement on March 1.
If the January inflation rate is even milder than forecast, it could dampen the Canadian dollar somewhat and provide a modest lift to bond prices, as investors bet the central bank may be inclined to suppress interest rates for longer.
A pickup in inflation could push up the currency and cause a fall in bond prices as rate hikes become more likely.
Seven of Canada’s 12 primary securities dealers surveyed last month expected the bank to raise its overnight rate target in the first half of this year, and six expected it to pull the trigger in either April or May.
The yields on overnight index swaps, which trade based on expectations of the policy rate, showed a 99.6 percent probability the bank will leave rates unchanged at its next policy announcement on March 1.
(Reporting by Louise Egan; editing by Rob Wilson)
Editors Note: Canada is a net EXPORTER of Oil. Inflation will be low because they do not need to convert to U.S. Inflated Dollars to buy oil. Mexico is a net EXPORTER of Oil. Inflation will be low because they do not need to convert to U.S. Inflated Dollars to buy oil. When hyperinflationhits america, the move will be easy.