Hawkish - Canada CPI is coming tomorrow

Work is coming back to its peak, slowly but steadily. I am in a new office and I spent most of my time learning new tricks and tips in the new place. It is not easy to adapt to a new situation when you are easy with what you do. I am in a situation where I am not motivated much to learn new stuff but have to adapt to new ways of doing things.

Not always but I get to have conversations with people who would like to discuss the current economic situation at the office.

I spent almost 1 hour debating how the CPI data would come tomorrow. The government of Canada is releasing August CPI data tomorrow. In my view, that may give us the picture we want on how the interest rate will behave in the remainder of 2022.

Tomorrow’s CPI data will be from August. That means, this data will not provide the impact in the market after the 75 basis points rate hike that happened earlier this month. Still, this data will have the impact of the August 100 basis points hike. The inflation data from the US was not encouraging. It increased. And, that was the point of discussion with my colleague today.

I believe that the inflation data will have a downtrend.

I also think that the reduction will not be significant but it will be in the descending order. However, there are many who believe that Canadian CPI data will follow the US trend and may show a slight increase.

In my view, there is a difference in timing when the Bank of Canada raised 100 basis points versus when the Feds in the US increased the rate by 75 basis points. If we consider that, the rate hike that happened since the July data will consider the impact of the full 1% increase in the rate.

I was also curious on how the Federal Gov in Canada calculates the index and what commodities are included as part of the process. The CPI basket of goods and services as published on the StatCanada website includes a range of items including food items, insurance and mortgage rates. Take a look at this website if you want to see the details.

https://www150.statcan.gc.ca/n1/pub/62f0014m/62f0014m2021015-eng.htm

Let’s see what the results are and how that will shape the upcoming interest hikes. I am crossing my fingers hoping the trend goes down. As a new homeowner with variable mortgage rates, I am already drowned on debts. I cannot pay higher mortgage payments any more.

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