Economists predict that the Consumer Price Index likely flared up in February amid higher gasoline prices, reinforcing the expectation that the journey back to Bank of Canada's two-per-cent inflation target will be a bumpy one.fell to 2.9 per cent in January
The January figures were something of a surprise, in that inflation fell back inside the Bank of Canada’s target range of 1 per cent to 3 per cent – only the second time that’s happened since prices began to accelerate in 2021. The numbers were unexpectedly weak, with several categories –including apparel and airfares – seeing price cuts.
The clothing, footwear and recreation categories “were surprisingly weak in January, suggesting we could see a chunky reversal,” Bank of Montreal rates and macro strategist Benjamin Reitzes said in a research note. “However, both sectors are discretionary spending, and given the consistent softness in consumption, firms might not be as able to reverse discounts or push prices higher.”
Investors have been sharply repricing their expectations for interest rates over the past couple months because of the persistence of inflation, particularly in the United States. Heading into Tuesday’s report, money markets were pricing in the first BoC rate cut in July; at the outset of 2024, the first rate cut was expected in April.– aggressively raised rates over 2022 and 2023 to curb demand in the economy and bring inflation under control.
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