Canadian headline inflation likely to have eased in September

Canadian consumer price inflation data for September is set to be released tomorrow. According to a TD Economics research report, the headline inflation is likely to have eased to 2.7 percent in the month as prices continue to unwind from the earlier pickup. Energy prices continue to be a lift to inflation but should slow down on a year-on-year basis, whereas food prices are likely to have picked up marginally.

Excluding food and energy, a mixed bag is expected and thus a lot depends on the one-off categories, especially airfares. The category failed to significantly correct from its 16 percent jump in July, and while it is tempting to anticipate a sharp correction, methodological changes make future performance highly uncertain, stated TD Economics.

Also, more attention will be on the core rate in September, which averaged an above-target rate of 2.1 percent in August. That is not considerable enough to affect the Bank of Canada’s policy bias, and further move higher is unlikely.

“We expect a stable reading and will be mindful of any downward revisions as well. Going forward, we expect headline inflation to continue to slide lower through yearend, averaging 2.5% in Q4, in line with the BoC’s forecast”, added TD Economics.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was slightly bearish at -65.6036, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 57.9326. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex