Canadian Inflation Preview: TD Securities Projects Rise in May CPI
As the market prepares for the release of Canada’s May Consumer Price Index (CPI), strategists at TD Securities are projecting a firming in headline inflation. Driven by rising energy costs and seasonal trends, the headline figure is expected to reach 3.1% year-on-year, representing a 0.3 percentage point increase from previous readings.
Drivers of Headline Inflation
TD Securities anticipates a month-on-month increase of 0.8%, slightly exceeding the broader market consensus of 3.0% year-on-year and 0.7% month-on-month. This upward movement is primarily attributed to a significant surge in energy product prices combined with seasonal tailwinds. Furthermore, analysts expect a modest acceleration in the price of core goods and a partial rebound in travel-related components, both of which are set to provide additional support to the headline print.
Core Inflation Shows Signs of Stability
While the headline numbers are expected to rise, the underlying core inflation measures are forecast to show stability. Analysts expect the CPI-trim and CPI-median to hold steady at 2.0% and 2.1%, respectively. This stabilization follows a notable cooling trend where these measures slowed by 0.4 percentage points over the last three months.
Implications for the Bank of Canada
Despite the higher trajectory for energy prices, the projected data suggests that core CPI remains largely in line with the Bank of Canada’s (BoC) April Monetary Policy Report projections. This alignment indicates that, for the moment, underlying price pressures are behaving according to the central bank’s expectations, even as volatile energy costs push the headline figure higher.
Note: This report is based on projections from TD Securities regarding the upcoming Canadian CPI release.
