PREVIEW-Canada inflation seen easing to 1.0 pct in June

WHAT: Canada’s consumer price index for June

WHEN: Friday July 23 at 7 a.m. (1100 GMT)

REUTERS FORECASTS June May Forecast

(ECONCA: ) range

Headline CPI m/m 0.0 pct +0.3 pct

Headline CPI yr/yr +1.0 pct +1.4 pct +0.8 pct to

+1.5 pct

Core CPI m/m 0.0 pct +0.3 pct

Core CPI yr/yr +1.8 pct +1.8 pct +1.6 pct to

+2.1 pct

For individual forecasts see: [ID: ECICA]

FACTORS TO WATCH:

Energy prices: Gasoline prices are expected to continue
falling in June from a year earlier, dampening the overall
consumer price index. Home prices are simmering after heating
up last year and earlier this year, and auto dealer discounts
appear to be getting more aggressive, analysts say.

Recovery: Despite two quarters of robust growth, there is
still considerable slack in the Canadian economy and there are
signs the pace of economic growth is slowing in the second
quarter and will continue to level off in the remainder of this
year. [ID: nN07168558] That trend will keep inflationary
pressures from flaring up.

Core inflation: Markets will watch for signs core inflation
is tipping higher than expected, which could prompt the Bank of
Canada to speed up the pace of interest rate hikes.

The central bank targets 2 percent inflation but watches
the core rate, which excludes gasoline and some other volatile
items, as a more reliable gage of underlying price trends. The
bank is widely expected to hike its overnight rate on the
Tuesday before the inflation release by 25 basis points to 0.75
percent, but the timing of subsequent credit tightening is
highly dependent on incoming data. [ID: nN14133612]

Summits: The surprising impact on CPI in February from
soaring hotel rates during the Winter Olympics in Vancouver has
sensitized analysts to the potential one-off effects of big
events. [ID:nN19500487] Thousands of delegates poured into
Toronto and Huntsville, Ontario, in late June for the G8 and
G20 summits, possibly driving up prices for accommodation and
travel although economists do not expect the effects to be
anywhere near as big as in February.

MARKET IMPACT:

Any significant surprises in the inflation report could
cause the Bank of Canada to either slow down or speed up the
pace of interest rate hikes this year and next as the bank
adjusts policy to keep inflation at 2 percent in the medium
term.

A lower-than-expected read on inflation could cause the
Canadian dollar (CAD=D4: ) to sag and push bond prices up as it
would signal weakness in the economy and could prompt the Bank
of Canada to refrain from rate consecutive hikes at its
scheduled decision dates in September, October and December.

If inflation appears to be heating up faster than expected,
the currency could shoot higher on investor expectations that
rates will rise faster.
(Reporting by Louise Egan; editing by Peter Galloway)

PREVIEW-Canada inflation seen easing to 1.0 pct in June