top of page

Title: Canada inflation could be at peak, but that's little relief for central bank

  • Writer: analysiswatch
    analysiswatch
  • Apr 21, 2022
  • 2 min read

Apr 21, 2022 06:25AM ET


By: AnalysisWatch


Overall, Canadian inflation may have peaked after hitting a 31-year high in March, economists said, although the central bank still faces an uphill battle to bring skyrocketing prices back down to earth before expectations solidify.


Even if March's 6.7% is the peak and price increases slow next month, inflation will remain at levels last seen 30 years ago, and economists say the Bank of Canada will have to act aggressively to get back closer to its 2% target.


However, there is also the possibility that inflation could rise further, especially if Statistics Canada includes used car prices (a key driver of U.S. inflation) in its index and updates the weighting of its baskets in the coming months.


Based on the higher-than-expected March numbers, economists are calling for a second 50 basis point (bp) hike in the fed funds rate to 1.5% in June, with money markets betting on a total of 250 bps this year.


Some economists are already predicting a third 50 basis point hike in July, with Scotiabank expecting a 75-100 basis point increase in June or July. Normally, the central bank raises rates by only 25 basis points at a time.


In an interest rate decision last week, the Bank of Canada said it now expects inflation to average nearly 6% in the first half of this year, fall to 2.5% later in 2023 and then drop to 2% in 2024.


After doubling the policy rate to 1% in that decision, Bank of Canada Governor Tiff Macklem said the bank would continue to act "forcefully" when necessary.


Countries around the world are grappling with runaway inflation due to rising demand and constrained supply chains. Russia's invasion of Ukraine has added to the pressure, sending commodity prices sharply higher.

Comments


2b94f773-a237-4da7-a599-6b42314ed9e6.png

Risk Disclosure: AnalysisWatch will not accept any liability for loss or damage as a result of reliance on the information contained within this website including data, quotes, charts and buy/sell signals. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible. Currency trading on margin involves high risk, and is not suitable for all investors. Before deciding to trade foreign exchange or any other financial instrument you should carefully consider your investment objectives, level of experience, and risk appetite.
AnalysisWatch would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore AnalysisWatch doesn’t bear any responsibility for any trading losses you might incur as a result of using this data.

bottom of page