MNI CAD CPI Preview: An Added Complication Amidst Tariff Fears

Executive Summary

• Released at 0830ET today, there is greater than usual uncertainty to the December CPI report, primarily owing to temporary tax cuts that became effective mid-month.
• Analysts are split whether the largest impact landed in December or January, with headline CPI estimates of analysts viewed below ranging from 1.2% to 2.1% Y/Y, after 1.9% in November.
• The BoC’s preferred core won’t be directly impacted but can be swayed by behavioural changes.
• Consensus readings should see headline undershoot BoC forecasts but core CPI overshoot after some recent upside surprises that have seen the 3-month rate accelerate above the 1-3% target range.
• With analysts split, we expect modest surprises to consensus in either direction to be faded with arguments made for a reversal next month.
• Instead, considering the broader backdrop of tariff threats, we expect greater sensitivity to upside surprises in the BoC’s preferred core metrics.
• Ultimately though, USDCAD is still likely to be dominated by tariff-related headlines in the interim.  

PLEASE FIND THE FULL REPORT HERE: CanadaCPIPrevJan2025.pdf