Four major banks reveal forecasts on upcoming inflation data

Economists and researchers from the four major banks in Canada have revealed their forecasts regarding the upcoming Canadian inflation data, as reported in an article by fxstreet.com.

Headline inflation is expected to be at 2.9% year-on-year in November. The core trim is expected to fall to 3.3% year-over-year while the core median is expected to be at 3.3% year-over-year.

If this occurs, headline inflation will be at its lowest levels since March 2021, and will also fall back within the 1-3% target range that the Bank of Canada has set.

What are the four major banks’ forecasts?

According to TDS, the headline Consumer Price Index (CPI) will drop to 3% year-over-year in November as energy prices are softer and prices remain unchanged due to seasonal factors.

“Shelter prices will remain the key driver behind a 0.25% (SA) increase for the ex. food/energy (xFE) aggregate, along with a modest rebound in core goods,” it said.

TDS also forecast further easing across the central bank’s preferred measures of core inflation. Its economists believe that the CPI-trim/median will slow to 3.40% year-over-year as there will be a larger deceleration to 2.3%.

“However, we do not believe the BoC will read too deeply into this development given the expected rebound in December, especially with one more CPI report before the January meeting,” it said.

Meanwhile, RBC Economics expects inflation pressures to be more moderate in November with headline inflation dropping to 2.9%, which reflects the pullback in retail gasoline prices and an easing in food price growth.

“That would mark the second time since March 2021 that the reading dips back within the Bank of Canada’s 1%-3% target range for inflation,” its economists said.

RBC expects price growth to stay at 3.4% year-over-year due to higher shelter costs. It also believes that the softening in the economy, as well as slower price growth, should reinforce that the BoC’s rate hikes are done for the cycle.

“We don’t expect a pivot to rate cuts right away – central banks will be cautious about declaring victory over inflation too early. We see the BoC starting the easing cycle around the middle of 2024,” it said.

The NBF forecasts that the drop in gasoline prices may mean that there will be no changes for the headline index before a seasonal adjustment.

“If we’re right, the 12-month rate of inflation should come down from 3.1% to a five-month low of 3.0%. Similarly to the headline print, the core measures preferred by the Bank of Canada should ease, with CPI-med likely moving from 3.6% to 3.3% and CPI-trim from 3.5% to 3.4%,” its economists said.

CIBC forecasts that the inflation rate is likely to hold steady at 3% year-over-year as prices will be unchanged for the month.

“With the drivers of core inflation becoming less widespread (mainly rents and mortgage interest costs), the Bank of Canada’s preferred CPI-trim and CPI-median measures of inflation likely continued to gradually decelerate,” it said.

Statistics Canada will release November CPI data today.