Despite a slight increase in Canada's inflation rate last month, the Bank of Canada remains determined to bring it down to 2%, with the possibility of another rate hike being considered in September. However, some economists believe that the positive overall figures may allow the Bank to pause on rate increases without a significant negative impact.
The Bank of Canada may shift its focus from the output gap to labor market indicators, such as unemployment and wages, in order to make inflation forecasts and guide its interest rate decisions, according to a report by CIBC economists. The report suggests that the labor market has become a more reliable indicator of excess demand or supply, and forecasts that if the job market outlook suggests it's not necessary, there may be no more rate hikes this year and rate cuts in early 2024.
A majority of Canadians believe that companies are using inflation as an excuse to overcharge them, with this view consistent across all income groups, according to a survey by Modus Research. The public's perception is influenced by reports of record profits for major corporations, causing growing economic anxiety among Canadians.
Canada's upcoming gross domestic product (GDP) reading is expected to be closely watched by the Bank of Canada (BoC) ahead of its September interest rate decision, with economists predicting a slowdown in the second quarter that could lead to a pause in interest rate hikes despite higher-than-expected inflation. The impact of recent wildfires and a dock workers strike is also expected to affect the data.
The Bank of Canada is expected to keep its key interest rate steady at 5.00% and maintain that level until at least the end of March 2024, despite rising inflation and a revival in the housing market, according to economists in a Reuters poll.
The Federal Reserve's preferred measure of inflation, the PCE price index, increased in July, suggesting a higher likelihood of further interest rate hikes this year.
US inflation remains above 3% as the cost of goods and services rose by 0.2% in July, prompting speculation that the Federal Reserve may freeze interest rates to manage inflation without causing a recession.
Central banks across major developed and emerging economies took a breather in August with lower interest rate hikes amid diverging growth outlooks and inflation risks, while some countries like Brazil and China cut rates, and others including Turkey and Russia raised rates to combat currency weakness and high inflation.
Bank of Canada Governor Tiff Macklem suggests that interest rates may not be high enough to bring inflation back down to target, emphasizing the need for further restrictive monetary policy to restore price stability.
Canada added 40,000 jobs in August, surpassing economists' expectations, while the unemployment rate remained steady at 5.5%. This positive job growth suggests that the economy is not completely stalled, but the Bank of Canada is not expected to raise interest rates in the near future.
Inflation is expected to rise in August as oil and gasoline prices increase, putting pressure on the economy and potentially leading to higher interest rates and a stronger dollar.
The Consumer Price Index is expected to show an increase in inflation in August, with headline inflation rising to 3.6% and core inflation easing to 4.4%, but the market is accustomed to this trend and the Federal Reserve is unlikely to change its rates at the upcoming meeting.
U.S. consumer prices are expected to have increased the most in 14 months in August due to rising gasoline costs, while underlying inflation is forecasted to remain moderate, potentially prompting the Federal Reserve to keep interest rates steady.
Inflation in the US accelerated for the second consecutive month in August due to rising costs of rent and gasoline, with the consumer price index rising 0.6% from the previous month and 3.7% from the same time last year.
US wholesale prices increased at a faster pace in August, indicating that inflation remains persistent despite interest rate hikes by the Federal Reserve.
Israel's annual inflation increased to 4.1% in August, surpassing the central bank's target range of 1%-3%, as consumer prices rose by 0.5%, driven by increases in the cost of fresh vegetables, culture and entertainment, transportation, and housing.
Nigeria's annual inflation rate reaches an 18-year high of 25.8% in August due to the removal of subsidies and rising prices, posing challenges for the country's largest economy.
Canada's inflation rate rose to 4.0% in August, driven by higher gasoline prices, while the Trans Mountain oil pipeline expansion is expected to disrupt oil flow to the US, potentially increasing prices, according to Statistics Canada. US Treasury Secretary Janet Yellen believes the US economy can withstand near-term risks such as strikes, government shutdowns, student loan payments, and spillovers from China's economic woes, stating evidence of a healthy labor market and consumer spending. Rent is rising faster in Brampton than in any other Canadian city, leading to financial difficulties for renters.
High inflation is leading to increased labor action in Canada as workers demand higher wages to combat the eroded purchasing power caused by rising costs of living, according to a report by RBC Economics. The report suggests that taming inflation is crucial to restoring peace in labor relations in the country.
Despite expectations of higher interest rates causing a spike in unemployment and a recession, the Federal Reserve's rate hikes have managed to slow inflation without dire consequences, thanks to factors such as replenished supplies, changes in the job market, and continued consumer and business spending.
Australian consumer inflation grew as expected in August, driven by surging energy and housing costs, raising speculation that the Reserve Bank may need to further increase interest rates.
The Federal Reserve's preferred measure of inflation decreased in August, indicating that efforts to combat inflation are progressing, although there are still price growth pressures that could lead to further interest rate hikes by the central bank.
Consumer spending in the US increased by 0.4% in August, while core inflation fell below 4.0% for the first time in over two years, potentially reducing the likelihood of an interest rate hike by the Federal Reserve.
Pakistan's inflation rate rose to 31.4% year-on-year in September, and the Ministry of Finance expects inflation to remain high in the coming months, with a predicted range of 29-31%.
Summary: Bank of Canada deputy governor Nicolas Vincent states that businesses in Canada are increasing their prices more often and by larger amounts, contributing to higher-than-expected inflation.
The upcoming monthly inflation report is expected to show that inflation in the US is cooling off, with overall prices for consumers rising by 0.2% compared to August and 3.6% compared to a year ago, indicating slower price increases in September than in August. However, if the report reveals that inflation remained higher than expected, especially in core areas, it may prompt the Federal Reserve to raise interest rates again, further slowing the economy.
Canada's main stock index, the S&P/TSX composite index, fell 0.8% as U.S. inflation data caused long-term borrowing costs to rise, resulting in a pullback in bond yields and a decline in interest-rate sensitive sectors.
Bank of Canada Governor Tiff Macklem has stated that aggressive interest-rate hikes are reducing demand and bringing down inflation, but policymakers remain concerned about the lack of downward momentum in inflation measures and are analyzing how a slowing economy will affect future price pressures.
The Bank of Canada faces a tough decision on whether to hike rates again in October, as the September inflation report is expected to be just as concerning as the recent U.S. data, and rising oil prices could further drive up inflation expectations.
Canadian businesses and consumers are feeling the impact of higher interest rates, resulting in reduced spending and subdued sales, although inflation expectations remain high, posing a challenge for the Bank of Canada's upcoming interest-rate decision.
Canada's annual inflation rate falls to 3.8% in September, grocery prices rise more slowly.
Canada's inflation rate decelerated to 3.8% in September, lower than economists were expecting, due to lower prices for various goods and services, including travel, durable goods, and some grocery items.
Canada's inflation rate slowed to 3.8% in September, supporting predictions of the Bank of Canada keeping interest rates steady.
Canada's annual inflation rate unexpectedly slowed to 3.8% in September, leading to reduced expectations for an interest rate hike next week.
Canada's inflation rate dropped to 3.8% in September, allowing the Bank of Canada to maintain its current interest rate.
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