Analysts at Macquarie said in a note this week that the prospect of a rate cut from the Bank of Canada (BoC) has been pushed to June or beyond in the CAD OIS market.
The firm said in its note ahead of Canada's CPI data that it was watching the CPI report for signs that the BoC may delay its policy rate cut beyond June.
"The headline CPI is likely to continue to ease lower because gasoline prices have fallen in January (the consensus is 3.4% year-over-year). But the BoC has recently emphasized the role that inflation in shelter prices has played in propping up CPI headline and core inflation, and thus preventing a more 'dovish' disposition by the BoC," they wrote.
The data revealed that Canada's annual inflation rate slowed more than expected to 2.9% in January, with core price measures also easing.
Macquarie went on to state that the mortgage interest cost component of CPI would be helped by BoC rate cuts. "That notwithstanding, the effects of tight monetary policy on housing price inflation is unlikely to be felt yet, which is why there will still be a focus in today's CPI report on shelter prices," they said.