Analysts at TD Securities are expecting Canada’s headline inflation to slip below target with a pullback from 2.0% to 1.7% y/y in August, with prices down 0.3% on the month.

• “Lower gasoline prices will provide the main catalyst for the deceleration with a 4% decline in the price at the pump, which would contribute to a larger (0.28pp) drag from energy on a year-ago basis. This headwind is set to intensify into 0.4pp by September before base effects from the 2018Q4 collapse in oil prices bring about a rapid recovery on a year-ago basis.
• With the pullback on headline CPI driven in large part by outsized swings in two components, we do not expect the same impact on core CPI measures that a broad decline in pricing pressures would indicate. The BoC's preferred core metrics are expected to hold at 2.0% y/y on average for August, while the ex. food & energy measure should edge lower to 2.0% from 2.1% y/y.”