Canadian CPI accelerated to a 3.5% pace in August (median same) following the 3.4% YoY clip in July, with a 26.3% gain in gasoline prices accounting for most of the increase. When energy is excluded, the CPI rose a much tamer 1.8% YoY during August after a 1.6% clip in July. Yet the CPI did fall 0.2% compared with July (median same) after the 0.3% MoM gain in July to mark the first decline since January's identical 0.2% drop. The BoC's core index jumped to 1.7% YoY, stronger than expected (median 1.6%) versus the 1.5% clip in July, with the index rising 0.3% MoM in August following back to back 0.1% gains in June and July. The acceleration in the core index highlights the ongoing upside risk to underlying inflation posed by the previous run-up in energy prices.
However, rising inflation has failed to boost interest rate expectations as market participants expect the BoC to lower rates at least once over the next 12 months. As a result, the Canadian dollar failed to move on the release, with the USDCAD holding around 1.0330.
