Import prices in Canada have increased by 10.3% year on year and export prices by only 1.8%. As a result, terms of trade of the economy are becoming worse. This also leads to an inflationary pressure in the economy.
Similarly, core inflation is already nearing to the central bank's target corridor. Therefore, monetary authority is expected to be active in order to curb the inflationary pressure.
Bank of Canada (BoC) is expected to raise rates at some point in the near future, says Commerzbank in a research note to its client.
