Date: August 20, 2010
Canadian Consumer Price Index, July 2010 Results
Source: Statistics Canada
Link to Release: http://www.statcan.gc.ca/daily-quotidien/100820/dq100820a-eng.htm
Summary: The Consumer Price Index (CPI) increased by 1.8 per cent yearover – year in July – a higher annual rate compared to the one per cent growth reported for June. However, this increase was driven largely by the onset of the harmonized sales tax (HST) in Ontario and British Columbia In addition to the taxation changes, gasoline prices rose 4.8 per cent in July and the broader energy category rose 7.9 per cent. The Bank of Canada core rate, which strips out volatile components including gasoline and sales taxes, rose by 1.6 per cent.
Analysis: Both the “All Items” and “Core” indices increased below the rates forecasted by the Bank of Canada in their most recent Monetary Policy Report. This is reflective, at least in part, of slower than expected economic growth since the end of the first quarter. With this in mind, the Bank arguably has more flexibility than originally anticipated related to the level of its target for the Overnight Lending Rate and the frequency of interest rate hikes moving forward. While the market consensus still supports further 25 basis point hikes in September, October and December, the possibility of the Bank taking a break from raising rates sooner than expected has increased.
Source: Toronto Real Estate Board
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