Inflation data released from the US are rather solid. Headline PCE accelerated to 2.3% yoy in May, up from 2.0% yoy and beat expectation of 2.0% yoy. Core PCE also jumped to 2.0% yoy, up from 1.8% yoy and beat expectation of 1.8% yoy. Personal income rose 0.4% in May, matched expectation. Personal spending, though rose 0.2%, below expectation of 0.4%.
The data support Fed’s projection of two more rate hike this year, in September and December.
Canada GDP rose 0.1% mom in April, above expectation of 0.0% mom. IPPI rose 1.0% mom in May while RMPI rose 3.8% mom.
BoC Governor Stephen Poloz has made himself very clear this week. Economic models suggested that there should be a rate hike soon. But models are just part of the equation for the decision. Trade tensions and impacts of higher interest rates on household are factors to consider too. To us, it’s 50/50 for BoC to hike in July.
