We expect an average of the Bank’s core inflation measures to remain close to 2% this year, before declining in 2020, as GDP growth falls below potential. An average of the Bank of Canada’s three core inflation measures reached a seven-year high of 2.1% in May, as CPI-trim rose by 0.3%-points to 2.3% and CPI-median increased by 0.2%-points to 2.1%. With GDP growth on track to pick up to 2.5% annualised in the second quarter and the Labour Force Survey (LFS) measure of wage growth accelerating recently, there are some signs suggesting that core inflation will rise further. We do not expect a sustained increase, however. Much of the pick-up in GDP growth in the second quarter reflects the unwinding of temporary factors that weighed on the economy at the start of the year. The business surveys imply that growth will drop back again in the second half of 2019. The other main measures of wage growth, which tend to be more reliable than the LFS indicator, have yet to show any meaningful acceleration.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services