PrefBlog

A rate hike in Canada won’t come as soon as some people think, according to recent inflation numbers:

The Bank of Canada’s efforts to set the stage for a rate increase were set back Friday after data showed inflation pressures continuing to ease.

Canada’s consumer price index rose 1.3 percent in May from a year ago, the slowest pace this year, down from an annual pace of 1.6 percent in April, Statistics Canada said Friday from Ottawa. Another key gauge of price pressures that excludes gasoline and some other more volatile items fell to the lowest since 1999.

The inflation report undermines the case for a quick rate hike by the Bank of Canada even as the nation’s economy has been growing at a pace that is among the fastest in the developed world.

I remain convinced that it will come eventually – but trying to time it is a mug’s game. But there are doubts about US inflation:

Barely a week after raising short-term interest rates for the second time this year, Federal Reserve officials are increasingly divided on the timing of their next move, with some saying they won’t support another increase until they see a pickup in inflation.

Inflation, as measured by the Fed’s preferred gauge, breached its annual 2% goal in February for the first time in nearly five years but has since retreated, sinking to 1.7% in April.

Fed officials in their public remarks since their policy meeting last week have disagreed on whether the recent weakening of price pressures is likely transitory or perhaps more persistent.

Fed Chairwoman Janet Yellen, New York Fed President William Dudley and Cleveland Fed chief Loretta Mester view the recent sluggishness as probably temporary, driven by some one-time factors such as new, more generous cellphone plans and slower growth in prescription drug prices.

Others such as regional Fed bank presidents Charles Evans of Chicago, Neel Kashkari of Minneapolis, Robert Kaplan of Dallas and James Bullard of St. Louis have expressed more concern about slower inflation.

This entry was posted on Friday, June 23rd, 2017 at 9:00 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.