Canadian inflation data for the month of June is set to release tomorrow. According to a TD Economics research report, the headline inflation is likely to have slowed down to 2.1 percent year-on-year, with prices down 0.2 percent from May.
The sequential slowdown is likely to have been driven by lower gasoline prices. Gasoline prices dropped 8 percent for the month as a whole, which should have subtracted 0.3 percentage points from the headline print in June.
Meanwhile, food prices are likely to have gained modestly after the recent strength in producer prices. Still 3.5 percent is likely to mark the peak for food price inflation since FX passthrough from a stronger Canadian dollar should give some relief in months ahead.
We also see scope for a pullback in telecom prices after new “unlimited” data plans were introduced by major service providers in early June. Looking past the headline, exclusion-based core measures (ie. ex food and energy) should hold stable given the large drag from energy prices, while the Bank of Canada’s preferred core measures are likely to edge lower to 2.0 percent y/y on average”, added TD Economics.
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