Canadian Inflation In February Eased

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Canadian Inflation In February Eased

Canadian Inflation In February Eased To 2.8%

The latest Canadian inflation report released by Statistics Canada showed that CPI dropped to 2.8% in February. A month ago, the inflation was 2.9% which means it has declined by 0.1% in a month.

The market forecasts Canadian inflation to reach 3.1%, but the actual reading took the market by surprise. If we look at CPI on a monthly basis, it actually jumped from 0% last month to around 0.3% in February.

Core Cpi Declines In February

During the same month, the core CPI went down from 2.4% in January to 2.1% in February. Overall, it appears that inflation is well underway towards 2%.

After the news of Canadian inflation, the CAD faced downward pressure which sent the USD/CAD higher towards the 1.36 handle. Now, the USD/CAD is standing at its multi-day highs.

Canadian inflation is an important metric that can impact the CAD and even influence the BoC's monetary policy. Now that the inflation data has been released, it has shown a lot of improvement, which means the BoC doesn't need additional tightening at all.

In fact, if the inflation trend continues downward, the BoC will soon have to start thinking about rate cuts. On the contrary, we also need to consider that the US Fed is expected to cut rates, which is bad news for the greenback.

It appears that there's a race now between the USA and Canada - Whichever country reaches the inflation target first will be the first one to cut rates.

So if the USA wins this race against Canada, it means the USD/CAD will start to turn lower. Conversely, if Canada achieves its inflation target first, it will send the USD/CAD higher, as Canada will be the first one to cut rates.

Historically speaking, the Bank of Canda tries to keep the inflation between 1-3% which means it has already come into the central bank's comfort zone.

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