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Statistics Canada is due to announce July inflation data for the nation on Tuesday, August 16, 2022.
Canada’s annual inflation rate accelerated to 8.1% in June, notching the highest level since January 1983, with transportation prices increasing at a much faster rate, driven by the surge in global energy demand, which led to a spike in gasoline prices. However, the annual inflation reading still came in below market expectations of 8.4%.
On a monthly basis, consumer prices in Canada increased 0.7% in June, down from the analysts’ estimates of a 0.9% rise, also slowing from the 1.4% increase recorded in May.
“For one of the rare times in the last two years, we’ve actually got a number that’s below expectations,” BMO Capital’s chief economist Doug Porter said. “The bad news is we still got the highest inflation in roughly forty years.”
So, what is Bank of Canada doing to control inflation?
At its recent meeting in July, Bank of Canada boosted its main interest rate by 100 basis points in a bid to combat the surging inflation level, to become the first G7 nation to announce such an aggressive rate increase in the current economic cycle.
The central bank increased its policy rate from 1.5% to 2.5%, recording its biggest rate hike in 24 years. The bank expects further hikes in the coming months.
Canada’s central bank projected a further increase in inflation, expecting it to remain at about 8% over the next few months. It now expects inflation averaging 7.2% in 2022.
USD/CAD outlook
The central bank’s unexpectedly aggressive interest rates hike provided some support to the Canadian dollar. If the bank continues to raise rates, it could drive the Loonie further in the near term. However, the safe-haven status of the US dollar, amid ongoing growth issues, might limit the overall gains for the Canadian dollar.
Are you ready to trade market moves that result from the upcoming inflation data?
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