Canadian Dollar Loses Ground as CPI Forecasts Signal Inflation Easing

10/15/2024

1 minute read

2024.10.15 07:02

The has declined against the for a tenth consecutive trading day and has fallen 2.1% in October. In Tuesday’s session, USD/CAD is trading at 1.3811 at the time of writing, up 0.11%.

Canada’s Inflation Rate Expected to Fall Below 2%

Is the tough battle against inflation finally over? Inflation has been falling and the August was a milestone as inflation dropped from 2.5% to 2%, the Bank of Canada’s target. This was the lowest level since February 2021.

The downward trend is expected to continue in September, with a market estimate of 1.8%. Two key core measures are expected to remain around 2.4%. , inflation is projected to ease to -0.1%, compared to 0.1% in August. Gasoline prices have been falling and are expected to push September CPI’s below 2%.

Today’s CPI release is the last key economic report before the announces its next rate decision on October 23. With inflation under control, the BoC has shifted its primary focus away from inflation to the labor market. The BoC has been aggressive and has lowered rates three times this year, as inflation has fallen and the labor market has weakened.

However, the September was stronger than expected, which supports the case for a modest 25-basis-point cut rather than a jumbo 50-bps move in October. The BoC would prefer to trim rates gradually at a 25-bps clip, but if key economic data is softer than expected, the BoC could respond with a 50-bps cut. USD/CAD-4-Hour Chart