Why Did Markets Show Little Response to Weak Canadian CPI
Canadian Core Inflation Remains Subdued
Last month, Canada's core Consumer Price Index (CPI) indicators continued to show weak inflation. This softness prompted a modest decrease in Canadian government bond yields, with the two-year yield slipping by roughly 2 basis points. The Canadian dollar also edged down, losing about a quarter of a cent against the US dollar.
All three core CPI metrics posted mild month-over-month increases when adjusted for seasonality and annualized. For example, the traditional core CPI, which excludes food and energy, rose just 1.5% on a seasonally adjusted annualized basis. The weighted median CPI, reflecting the midpoint of the inflation basket, climbed 1.6%. Meanwhile, the trimmed mean CPI, which removes the highest and lowest 20% of price changes, also remained subdued. (See charts 1–3 for more details.)
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