Canadian headline consumer price inflation accelerates in June

Canadian consumer price inflation accelerated in June. On a year-on-year basis, headline inflation came in at 2.5 percent, an acceleration from May’s 2.2 percent. This is above consensus expectation of 2.3 percent. Adjusted for seasonal patterns, prices were up 0.1 percent sequentially. Several items saw price growth accelerate year-on-year, led by energy prices at 12.4 percent from 11.6 percent.

Household operations were the only category to see inflation decelerate to 0.1 percent from 0.3 percent in the prior month. The Bank of Canada’s core measures rose in the month. CPI-trim and CPI-median both were up 2 percent, while CPI-common remained the same at 1.9 percent.

After a weak report last month, inflation regained its momentum in June. Price growth is right on target, with evidence of firming in several categories. Energy prices are expected to stay volatile, and lower prices for telephone services are still weighing on inflation, noted TD Economics in a research report. Looking through that, inflation is in line with a sound economy operating close to full potential.

Downside risks to trade continue to be at the fore, but the economic data are increasingly making the case for further hikes by the Bank of Canada. Given the upside surprise on inflation, the odds of one more hike this year have increased, stated TD Economics.

At 14:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bullish at 116.912, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -72.7665. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex