Softer Canadian CPI Gives Bank of Canada Room to Ease Policy — RBC
Canada’s February 2025 Consumer Price Index (CPI) showed headline inflation easing to 2.1% year‑over‑year and core measures moderating to about 2.4%, marking the third consecutive month inside the Bank of Canada’s 1–3% target range. RBC Capital Markets attributes the disinflation to global supply‑chain normalization, softer domestic demand, and stabilized commodity prices after 18 months of aggressive tightening that brought the overnight rate to 5.0%. RBC’s baseline projects gradual policy normalization beginning mid‑2025, with about 75 basis points of rate cuts through the year if inflation continues to ease. Markets reacted with a slight depreciation of the Canadian dollar and bond yields pricing in higher odds of near‑term easing. RBC highlights that policy decisions will remain data‑dependent, considering wage growth, employment, GDP, and international policy moves. Risks include premature easing that could rekindle inflation. Core keywords: Canadian CPI, Bank of Canada, inflation, interest rates, RBC analysis.
Neutral
Softer CPI that sits inside the Bank of Canada’s target range increases the probability of policy easing, which can be supportive for risk assets in general. However, RBC projects gradual, data‑dependent rate cuts starting mid‑2025 (about 75 bps through the year) rather than aggressive easing. For crypto markets this implies a mixed effect: modestly positive if rate cuts materialize (lower yields and potential search for higher‑return assets), but limited upside given the cautious, gradual pace and ongoing macro risks. The Canadian dollar and Canadian rates markets may lead the initial moves (FX weakness, lower yields), while crypto sensitivity will depend on global liquidity and US Fed policy. Historically, central bank easing cycles that are gradual produce moderate tailwinds for crypto rather than sharp rallies. Key short‑term impacts: increased volatility around data releases and central‑bank guidance; potential modest upside for risk assets if path to easing solidifies. Long term: supportive if easing becomes sustained and global liquidity improves, but risks remain if easing is reversed or inflation reaccelerates.