Canadian total CPI was 2.1% year over year in January (quite a bit higher than the December reading of 1.5%), but up only 1.5% if you take out the impact of higher gas prices.
For those of you who drive, taking out the impact of gas prices may make little sense on your day to day lifestyle expenses.
For the Bank of Canada, who look at longer term trends in prices so that they can ensure that they are fully versed on their key mandate of price stability, the month to month volatility of some goods and services is not as significant.
In fact the "core" prices which the BOC focuses on (most preferred measure: CPI-common) in making their monetary policy decisions, remains below their 2% target.
Dipping from December's reading of 1.4% to 1.3% in January.
In a nutshell, there is no chance of an increase in interest rates at the March 1 meeting, Bank of Canada interest rate decision day.
Why does this matter?
For all of you variable rate borrowers, you can continue to comfortably stay the course.
As far as our Wealth Forecast assumption on personal annual average inflation at 2.5%, this still remains a relatively conservative estimation.
If you are getting an annual average (multiple year) return of 5% after fees and taxes, your net after inflation ("real") return is about 1% higher than otherwise assumed:
5% - 2.5% (assumed inflation) = 2.5%
5% - 1.5% (actual inflation) = 3.5%
That is a good thing!
Have a great weekend!
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist