RPT-PREVIEW-Canada’s Nov inflation rate seen easing to 2.2 pct

(Repeats Preview from Dec. 17)

WHAT: Canada’s consumer price index for November

WHEN: Tuesday, Dec. 21, at 7 a.m. (1200 GMT)

REUTERS FORECASTS Nov Oct Forecast
(ECONCA: ) range
Headline CPI m/m +0.3 pct +0.4 pct
Headline CPI yr/yr +2.2 pct +2.4 pct +1.9 pct

to +2.5 pct
Core CPI m/m +0.2 pct +0.4 pct
Core CPI yr/yr +1.6 pct +1.8 pct +1.0 pct

to +1.7 pct

For individual forecasts see: [ID:nECICA]

FACTORS TO WATCH:

If the forecasts are correct, the report will prove that
the surprising jump in October’s annual inflation rate to 2.4
percent was just a blip and therefore not a concern for the
Bank of Canada.

Inflation had been modest, in fact lower than expected, for
much of the year so markets are looking for reassurance that
trend won’t suddenly be reversed. That would leave the central
bank in a comfortable position for holding its key interest
rate unchanged at 1 percent for at least the first quarter of
2011.

The annual inflation rate is seen easing for both overall
inflation and the core consumer price index, which excludes
volatile items and the effect of indirect taxes.

November is the month when the CPI reflects price increases
for new car models, which could exert some moderate upward
pressure. Further pressure will come from gasoline prices,
which also rose in the month.

MARKET IMPACT: A higher than expected annual inflation rate
would add pressure on the central bank to raise interest rates
sooner, leading to a rally in the Canadian dollar.

Markets expect the bank’s next rate increase to be in the
second quarter of 2011, according to the median forecast in a
Reuters poll early this month. [ID:nN02264459]

The yields on overnight index swaps, which trade based on
expectations of the policy rate, showed an 88.4 percent
probability the bank will leave rates alone at its next
decision date on Jan. 18. (BOCWATCH: )

A weaker than expected number could push down the Canadian
dollar on expectations the central bank will stay on the
sidelines longer.
(Reporting by Louise Egan; editing by Rob Wilson)

RPT-PREVIEW-Canada’s Nov inflation rate seen easing to 2.2 pct