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Something for your Espresso: PPIs speak loudly

The Canadian PPI continued its landslide yesterday and it makes you question whether BoC was too quick re-accelerating the hiking cycle. Meanwhile, markets keep coping with USD issuance.
2023-06-20
<a href="https://stenoresearch.com/author/andreas/" target="_self">Andreas Steno</a>

Andreas Steno

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Morning from Europe.

Has Bank of Canada committed a grave policy error by restarting hikes? The PPI just printed at -6.3% YoY after a monthly drop of 1% yesterday. This is a new record in PPI deflation only roughly matched through 2008. Inflation is coming down at lightning speed in Canada.

It would be a major upset if the CPI did not follow the PPI markedly lower in coming months. Maybe the trigger (both up and down) of this inflation cycle was the supply chain? Supply chain issues -> goods/commodity inflation of size -> wage demands due to rising prices of necessities and vice versa now.

Chart 1: PPI looks, ahem, deflationary/disinflationary in Canada

The Canadian PPI continued its landslide yesterday and it makes you question whether BoC was too quick re-accelerating the hiking cycle. Meanwhile, markets keep coping with USD issuance.

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