Canada: Next week data includes CPI and BoC statement - NBF

National Bank of Canada’s analysts took a look at next week key events from Canada. Data to be released include inflation while on Wednesday the Bank of Canada will announce its decision on monetary policy. 

Key Quotes:

“A lot of attention will be on the release of March’s consumer price index. The headline measure may have increased 0.4% m/m (not seasonally adjusted), buoyed by a 3.9% rise in gasoline prices. This progression, combined with a positive base effect, should push the annual inflation rate up two ticks to 2.4%. Meanwhile, the annual rate for CPI-common should remain unchanged at 1.9%.”

“The unexpected strength of inflation in Q1 may cause some headaches at the Bank of Canada, which will be announcing its rate decision on Wednesday. While the central bank had estimated Q1 CPI to grow only 1.7% y/y, inflation is in fact heading for a 2.1% print. The Bank’s will also have to comment in its Monetary Policy Report update on the potential upward risk to its growth forecast on account of the fiscal stimuli announced in provincial budgets.”

“We expect the Bank to stay on the sideline for now. Justifying its decision, the BoC may point at the latest Business Outlook Survey (BOS) which showed a below-average ratio of firms reporting that labour shortages were restricting their ability to meet demand. The NAFTA negotiations, which are still underway, may also lead the Bank to err on the side of caution.”

“Both headline and ex-auto retail sales likely expanded for a second month in a row in February, helped by an expected rebound in the auto/parts category and decent employment gains. Manufacturing shipments, for their part, may have rebounded in February based on a marked increase in exports of factory goods during the month. We’ll also keep an eye on the release of international securities transactions for the month of February.”