Canada: There could be persistence in price pressures rather than a transitory effect – NFB

Data released on Wednesday, showed higher-than-expected inflation reading in Canada for the month of April. According to analysts at the National Bank of Canada, inflation could be more persistent rather than a transitory effect. 

Key Quotes:

“It should not come as too much of a surprise to see the annual inflation rate rise sharply in April as the headline figure has once again benefitted from a substantial positive base effect. Still, the print was way above consensus expectations.”

“The increase in April reflected last year's weakness as much as the current runup in prices. Specifically, headline inflation was positively affected by a 62.5% increase in gasoline prices over the past 12 months.”

“Considering the strong annual prints released this morning we believe there could be persistence in price pressures rather than a transitory effect. Inflation was strong albeit a difficult month of April regarding the sanitary situation. Provinces are starting to roll-out their re-opening plans and that should allow consumers to unleash sizeable excess savings. In sum, extremely stimulative monetary and fiscal conditions through the end of 2022 will contribute to maintain inflation in the upper band of the central bank target range in 2021 and 2022.”