Okay, now it's our turn.
Last week we heard that U.S. inflation had been replaced by deflation. Wednesday we get the message that Canadian prices are falling rather than rising too.
According to Statistics Canada, the consumer price index in Canada slipped by 0.5 per cent in the month of October. The market had expected a smaller decline, in the order of -0.3 per cent.
The year-over-year increase in the CPI - the inflation rate - came in at 1.9 per cent in the month. That is down from 2.6 per cent in October, and well below the 2.4 per cent expected by the market. In fact, the October inflation rate is actually the lowest we have seen in more than two years.
It was mostly about energy.
The energy price component of the CPI dipped by 2.7 per cent between October of 2000 and October of 2001. Gasoline prices at the pump, natural gas prices, fuel oil prices-all are more moderate now than they were through most of 2000. The reversal from the climb last year is what is putting most of the downward pressure on the CPI now. So maybe it's not enough to look at the broadest inflation rate and call it deflation.
And indeed, other measurements show less spectacular readings. The inflation rate to watch these days is the so-called "CPIX" figure, which excludes the eight components of the CPI deemed most volatile. That one came in at 2.2 per cent in October, which is close to its range for most of this year.
And it's the one to watch because it's what the Bank of Canada watches.
They're certainly watching it now.
Next week the Bank will make a decision on what to do with Canadian interest rates. At the moment, our benchmark overnight financing rate is 2.75 per cent, as compared to the 2.0 per cent Fed Funds Rate.
Now, no one is saying that the Bank was particularly worried about inflation. Even so, if there had been any hints of price pressures in Wednesday's data, we may have heard some buzz about "will-it-be-25-or-will-it-be-50?". That seems unlikely now. With the debate now being "do we call this inflation or deflation," it looks like the Bank has the all-clear to slash 50 basis points off rates.
After that, though, it's anybody's guess as to how much more rates go down on either side of the border.
Wednesday, we also got U.S. jobless claims data. At 427,000, the level of people filing first time claims is still very high. Even so, it has been inching down for three weeks now. Which suggests that maybe, just maybe, the U.S. economy may be close to turning a corner.
Playing economic connect-the-dots, that means that the Fed's (and the Bank of Canada's) rate-cutting work may be done. On that fear, bonds have are continuing last week's trend, and getting pummeled Wednesday.
Canadian retail sales come out Thursday.
Stay tuned.
Linda Nazareth is ROBTv's resident economist.