Wednesday, January 25, 2012

Canadian CPI tampering

Well, the BoC finally got its wishes and the CPI has finally taken a breather.  Granted most of the move was driven by lower fuel costs (its not over yet folks).  CPI was 2.3%, down 0.6% from last month while core CPI was down to 1.9% -- both figures are closer to the BoC target of 2%.  Yet worries remain, because although prices have tampered, the real "saviour" here is fuel cost.  As of November 30th they were up 13% for the year, but only 7.2% for the year ending December 31st -- a massive deceleration in fuel costs has helped, both measures for December.

Bottom line, 30 year BoC TBonds are still trading around 2.5% for 30 year money.  Granted there's a lot of foreign appetite for CAD sovereign bonds -- after all Canada has one of the few central banks not printing like mad.  The Americans are pricing the Feds printing an extra $777 billion (real cash) over the next few months.

Granted there is zero sign of inflation in the US economy... still that kind of printing has to translate into something serious (inflation wise) eventually. 

Anyway, good-ish news for Canada!

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