Canada May CPI 3.4% y/y versus 3.4% expected

<ul><li>Lowest reading since June 2021</li><li><a href="https://www.forexlive.com/news/canada-april-cpi-44-yoy-versus-41-expected-20230516/" target="_blank" rel="follow">Prior </a>was 4.4%</li><li>CPI m/m +0.4% vs +0.5% expected</li><li>Prior m/m reading was 0.7%</li><li>Gasoline prices -18.3% vs -7.7% y/y in prior month </li><li>Gasoline
prices -0.8% m/m vs +6.3% prior month</li><li>Ex gasoline +4.4% vs +4.9% prior</li><li>Food +8.3% vs +9.1% y/y prior</li><li>Mortgage interest costs 4.9% y/y vs 4.9% increase in April</li><li>Goods inflation +2.1% y/y</li><li>Services inflation +4.9%</li></ul><p>Core measures:</p><ul><li>BOC core y/y 3.7% vs 3.9% expected (prior 4.1%)</li><li>BOC core m/m +0.4% vs +0.5% prior</li><li>Median 3.9% vs 4.2% prior</li><li>Trim 3.8% vs 4.2% prior</li><li>Common 5.2% vs 5.7% prior</li></ul><p>This is the final CPI print ahead of the July 12 Bank of Canada rate decision. Ahead of the release, the market was placing a 65% probabilty on a 25 bps rate hike and that ticked to 62% afterwards. I maintain that the BOC is making a mistake in hiking further rather than simply letting high rates do their thing to a heavily-indebted Canadian consumer.</p><p>Excluding mortgage interest cost, CPI rose 2.5% in May which argues that the BOC itself is the main source of inflation for Canadians.</p>

This article was written by Adam Button at www.forexlive.com.