Canadian consumer price inflation slows down in January on declining energy prices

Canadian consumer price inflation eased in the month of January. On a year-on-year basis, the headline inflation came in at 1.4 percent, a deceleration from December’s print of 2 percent. It is in line with the median survey estimate. The deceleration in headline print was mainly driven by the falling energy prices. Energy prices dropped 6.9 percent. Stripping energy, prices rose 2.1 percent.

Services prices also slowed in the month, falling to 2.7 percent in January from 3.5 percent in December. Air transportation eased to 4.1 percent in the month, following a rise of 28 percent in the prior month. The volatility in this component has increased tremendously in the past year alongside methodology changes. Increasing the variability in headline inflation, noted TD Economics in a research report.

The Bank of Canada’s preferred measure of core rate came in flat in the month. CPI-common and CPI-trim continued to be at 1.9 percent year-on-year, while CPI-median remained at 1.8 percent for the third consecutive month.

“The Bank of Canada is maintaining a bias to further tightening, but with limited inflation and slowing growth there is little urgency on this front. Indeed, much like their counterpart stateside, the benign inflation environment may lead policymakers to question whether further rate hikes are even necessary or whether the current policy setting is the fabled goldilocks "just right"”, added TD Economics.

At 14:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bullish at 140.493, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -87.8077 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex