Inflation is a measure best read well in advance of the impact it will cause to interest rates.
Inflation
Forecast for February 2023
and
Q2 2023 Target
The Bank of Canada is now three quarters of the way towards reaching the top of it's inflation range target of 3% annually by late May or early June of 2023.
We are now forecasting February will record a 5.04% increase over February of 2022. Even if the increase is a quarter point higher, due to monthly anomalies that our metrics attempt to eliminate from our forecasts, the mid-year expectation of the Bank of Canada seems well founded.
Canada's Pace of Inflation (POI) has now been below the 2% annual target since August of 2022 ( November's anomaly was corrected in December ) so after 7 months it is pretty safe to say inflation has decelerated as rapidly as it accelerated beginning in December of 2021 a mere four months after Canada entered it's current home trading contraction.
Where upon the economy begins to falter we suspect Canada's Central Bank will begin to have room to reduce rates as early as July if needed.
Commentary:
Since we use our inflation forecasts solely for the purpose of forecasting components of the housing market we do not focus on individual subsets of inflation that make up its entirety. There is a suggestion clearly recorded in our POI chart above that the rapid acceleration in inflation readings in early 2022 happened in parallel with declining home sales. We may need to take a deeper dive into the components of inflation to see how there collection methodology may be key drivers to the monthly anomalies we often note.
We are now forecasting February will record a 5.04% increase over February of 2022. Even if the increase is a quarter point higher, due to monthly anomalies that our metrics attempt to eliminate from our forecasts, the mid-year expectation of the Bank of Canada seems well founded.
Canada's Pace of Inflation (POI) has now been below the 2% annual target since August of 2022 ( November's anomaly was corrected in December ) so after 7 months it is pretty safe to say inflation has decelerated as rapidly as it accelerated beginning in December of 2021 a mere four months after Canada entered it's current home trading contraction.
Where upon the economy begins to falter we suspect Canada's Central Bank will begin to have room to reduce rates as early as July if needed.
Commentary:
Since we use our inflation forecasts solely for the purpose of forecasting components of the housing market we do not focus on individual subsets of inflation that make up its entirety. There is a suggestion clearly recorded in our POI chart above that the rapid acceleration in inflation readings in early 2022 happened in parallel with declining home sales. We may need to take a deeper dive into the components of inflation to see how there collection methodology may be key drivers to the monthly anomalies we often note.
