Canadian headline CPI is expected to decelerate sharply in March – TDS

Analysts at TD Securities (TDS) offer a brief preview of Tuesday's release of the latest Canadian consumer inflation figures and forecast a sharp deceleration for headline CPI in March.

Key quotes:

“With inflation falling to just 4.3% y/y from 5.2% in February, as a 0.5% m/m increase is countered by a large base-effect from 2022 (market: 4.3% y/y, 0.6% m/m). Groceries will remain a key driver even with some moderation on a year-ago basis, while the persistence of tight labour markets and strong wage growth will continue to put pressure on restaurant prices. We also look for another large increase in rents and mortgage interest costs, although March will see a larger offset from homeowner replacement costs. Elsewhere, we look for energy prices to post a modest increase while clothing provides another source of strength with help from seasonal factors. We also look for a large drop in core inflation measures, with the average of CPI-trim/median falling 0.35pp to 4.50% in March.”