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Desjardins Expects BoC to Keep Rates Unchanged Despite Higher CPI

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The Canadian consumer price index surged in May, though core measures remained "tame", allowing for the Bank of Canada to keep rates unchanged this year, said Desjardins Securities after Monday's CPI data.

CPI increased 3.2% year over year and 1.0% on a monthly, non-seasonally adjusted basis, according to Statistics Canada.

Higher gasoline and food prices drove most of the increase, said Desjardins in the note, adding that, excluding food and energy, prices rose 0.26% month over month, leaving the annual rate at 1.6% for May.

The BoC's preferred measures of underlying inflation were broadly consistent with its 2% target, pointed out Desjardins. Core median and trimmed mean CPI increased 0.18% and 0.23%, respectively, leaving their average annual rate at 2.05% in May.

"Canadian central bankers shouldn't get too fussed about the acceleration in total inflation," according to Desjardins, as underlying inflation stays around the BoC's target. In addition, falling oil prices are beginning to offset the earlier spike in gasoline and jet fuel prices.

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