The USD/CAD pair has increased, and the CPI has shown a falling trend. The pair is currently at 1.3329, an increase of 0.59%. It is estimated that there could be a further rise if steps are not in place to control the rising inflation.
Cold water to that fire is Canada’s report for August which highlights that the inflation could have peaked with a decline on the way. The country has seen a fall to 7%, and a further fall is already estimated. The monthly decline is 0.3%. It is being looked at as the best figure since December 2021, when the Covid-19 Pandemic measures were being controlled for recovery.
Inflation may be on a downward trend, but a factor contradicts that statement. Food prices are constantly rising, creating a stir in the minds of the citizens about how they should go around shopping for the family.
Food prices have hit the highest value since 1981. There is no indication if there is anything to get the order in control.
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Regarding the overall picture of inflation, Canadian forex brokers predict that the Bank of Canada could deliver a rise of 75bp after its meeting. The figure aligns with what experts expect the Federal Reserve to deliver.
The Bank of Canada went on a spree to hike interest rates to control inflation. If there is indeed a downfall in inflation, then the steps have delivered the result in their favor. A recent hike from the Bank of Canada was for 75bp, coming during the earlier days of this month.
A room to lower the interest rate is in question; however, an increase would still be incoming. The rise will not pinch as it could for 50bp for the next month, followed by a 25bp hike in the coming month. This will take the rate to 4%, the highest since 2008.
A closer look lies on the upcoming meeting of the Federal Reserve. The conclusion is expected to deliver a rise in the interest rate by 0.75%. This will further hurt the Canadian Dollar. The Federal Reserve is working to control inflation. There would be little clarity if the measures were introduced on time.
The rate-tightening cycle does not seem good for anyone, especially the global market. A recession is in the talks to happen based on how the Federal Reserve acts from now on.
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