CIBC Research discusses its reaction to today's Canada CPI print for the month of December.
"Canadian inflation unexpectedly dipped in December. The consumer price index fell 0.2% NSA MoM, leaving the annual rate of inflation running at 0.7%," CIBC notes.
"While the effect of that category boosting CPI will likely be even more pronounced in January, it should reverse much of those gains in February and March. Even if, as we expect, inflation accelerates further from here to eclipse the Bank of Canada's 2% target in the months to come, it will be driven by these temporary and volatile factors, including gasoline prices, temporary methodologies and base effects. As a result, the Bank of Canada will continue focusing on supporting the recovery until slack has been absorbed such that inflation is sustainably running at 2%, something we don't expect to see until 2023," CIBC adds.