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Scotiabank Economics Research Hub
Scotiabank Economics’ recent research underscores a divergence between Canadian and US inflationary trajectories, highlighting the sensitivity of market reactions to data quality and core metrics. In Canada, while the headline CPI print was unexpectedly soft at 2.8% year-over-year, analysts caution that the decline in services inflation may be distorted by questionable data regarding travel tour pricing. Conversely, the US CPI report confirms persistent inflationary pressure, particularly within core services excluding shelter and energy, which posted an 'explosive' 5.5% annualized increase. This US data fueled a hawkish reassessment of Federal Reserve policy, as evidenced by a sharp move higher in 2-year Treasury yields. Ultimately, the research suggests that while Canadian core metrics show signs of underlying upward momentum despite headline figures, US markets face a more straightforward challenge from structural inflationary heat that contradicts dovish consensus estimates.
2 reports available
Canada Slowly Emerging From Core Inflation Softness
Canadian April CPI undershot expectations at 2.8% y/y, though core measures are slowly rising from previous lows. The headline weakness was driven by a questionable drop in travel service prices that offset accelerating core goods inflation.
US Core Services Inflation Lit Up in April
US core CPI for April came in hot at 0.4% m/m, driven by an 'explosive' 5.5% SAAR increase in core services excluding shelter. While shelter costs rose due to statistical factors, the broad-based heat in services inflation remains a major concern for markets and the Fed.
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