Strategists at JPMorgan are seeing a full percentage point interest hike from the Bank of Canada at its July meeting following the record-breaking inflation data for the month of May.
Canada’s consumer price index rose 7.7%, significantly higher than the consensus estimate of 7.4% and almost a full point over April’s reading of 6.8%. It also went well beyond Bank of Canada’s spring forecast of a 5.8% average this quarter.
According to the JPMorgan strategists in a report called “Canada CPI: Get Out The Oven Mitts,” data shows that the inflation is likely to continue with a further 6% surge as gasoline prices in June.
“We now see material risk that the bank will announce a 100 [basis point] increase in July,” according to the report.
As the inflation continues to rise, with a peak that’s still seemingly elusive, the strategists believe that the Bank of Canada must “move more aggressively,” the report said, “to tame inflationary pressures.”
JPMorgan strategists expect the Canadian central bank to raise its overnight rate to 2.25% in July, or by an additional .75%.
Capital Economics’ Stephen Brown sees inflation going up 8.3% in June. And while he expects the price growth to slow down in July if oil prices decline, he sees inflation for the year of 2022 to be over the 7% mark.
“The big picture remains that underlying inflationary pressures were far stronger than most anticipated,” according to Brown.
Information for this briefing was found via Financial Post and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.