CIBC Research discusses its reaction to today's Canadian CPI report for the month of August.
"Canadian inflation climbed even higher in August, but the point reached might represent the peak of the mountain. The surprisingly strong 0.2% gain in prices not seasonally adjusted took headline inflation all the way up to 4.1%, the highest print since 2003 and above consensus expectations for an annual rate of 3.9%. Some of the increase in the headline number just reflects base effects from a weak print a year ago falling out of the calculation...Overall, with base effects continuing to fade and the fourth wave of the virus in Canada creating a headwind for services businesses, the annual rate of inflation will likely begin to fall in upcoming months. Furthermore, the core-common component measure of inflation was still only 1.8% in August," CIBC notes.
"As a result, the Bank of Canada won't be overly concerned with even the above-4% headline print, since it doesn't seem like the sustainable inflation central bankers are looking for. Still, the surprise has pushed yields slightly higher and the Canadian dollar a touch stronger," CIBC adds.