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Discussion Starter · #1 ·
April's consumer price index came in at 6.8%.

Scotiabank is forecasting 7.8% for May (the figure is due on Wednesday).

What's your best guess? I'm going with 7.6%.

From Reuters:

What central banks dread is a situation in which price increases become self-fulfilling - expectations for higher prices cause people to raise wage demands and accelerate purchases, driving further price increases.

The Bank of Canada is fighting a "battle" to control inflation expectation, said Derek Holt, head of capital markets economics at Scotiabank, who projects a 7.8% rate of growth for May CPI.
"They missed their chance to nip it in the bud and now you've got consumers and businesses who aren't fussing over what's driving it. They are engaged in extrapolative behavior, which is the path central banks always want to avoid."

As in other countries, much of the reason for soaring prices comes from supply constraints related to the COVID-19 pandemic and the war in Ukraine. But as inflation lingers, expectations that price pressures will continue have climbed.

 

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Discussion Starter · #9 ·
Agree? Disagree?

(Bloomberg) -- One of Canada’s largest commercial banks fired a broadside at Prime Minister Justin Trudeau’s government, warning that high levels of federal spending are hurting the fight against inflation.

Economists at Bank of Nova Scotia, in a report to investors published Sunday evening, said that aggressive interest rate increases launched by Bank of Canada Governor Tiff Macklem will unduly punish businesses, given still-elevated levels of fiscal stimulus.

“The output losses that the BoC must engineer to rein in inflation are falling disproportionately on the private sector,” said the report by Scotiabank Chief Economist Jean-Francois Perrault and Rene Lalonde, the bank’s director of forecasting.

“In effect, high levels of fiscal spending will necessitate an unnecessarily large crowding out of private spending,” they said. “Less government consumption would lead to a lower path for the policy rate and take some of the burden of adjustment away from the private sector.”

 

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Discussion Starter · #22 ·
Doug Porter, chief economist at BMO Capital Markets, said prior to the data release that an inflation reading in the mid-7% range for May "will be enough to convince the Bank of Canada to unleash a 'highly unusual' 0.75-point rate hike," like the Federal Reserve did this month. Traders in the overnight-index swap market are leaning toward such a jumbo-sized move when the Bank of Canada issues its next decision on July 13.

 
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