Canada's inflation to recover to positive territory at 0.3% YoY in June – TDS

Previewing Wednesday's Consumer Price Index (CPI) data from Canada, TD Securities analysts said that they expect annual inflation to recover to positive territory at 0.3% in June.

Key quotes

"With energy prices driving most of the headline increase, we look for a more muted performance across core components. Ex. Food & Energy inflation should remain unchanged at 0.6% y/y while the average of the BoC's core measures should hold in the 1.6-1.7% range."

"A slightly above consensus print will not have any impact on the BoC outlook; the Bank's latest forecasts have inflation holding below target through 2022 and their new guidance pours cold water on any policy shift before excess capacity is absorbed."

"The new Analytical Price Index (API), a joint effort by the BoC and StatCan, also clouds the implication of any major surprise in the CPI; the Bank has said it treats the API similar to core measures and stressed the modest gap between the API and headline CPI."