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Was it 3 and 4 month core inflation? Or was it rising commodity prices and the flat exchange rate? (Of course, it could be both, and you are right to draw our attention to the inflation data.)

The Bank has made it clear that it will not react to "type 1" changes in the exchange rate (those caused, or at least correlated with [don't shoot!] a change in commodity prices etc.), but will react to "type 2" changes in the exchange rate (those caused by something other than a change in demand for Canadian output). By implication (though, I admit, the inference is not 100% transparent), an increase in commodity prices coupled with no change in the exchange rate should be equivalent to a "type 2" depreciation of the exchange rate, to which the Bank should respond by raising the overnight rate. Which is what the Bank did (or, it raised the overnight rate relative to the cut it had previously planned).

In my opinion, the Bank's policy would be easier to predict if it simply said that it would respond to commodity prices (and other indicators of demand) AND to the exchange rate. If commodity prices rise, raise the overnight rate. If the exchange rate appreciates, lower the overnight rate. If commodity prices rise and the exchange rate appreciates, do nothing, etc. (all understood ceteris paribus, of course).

I realize that this is about a month too late, but... I agree with your point that the shorter-term trends in core CPI have been picking up. However, using non-seasonally adjusted data certainly exaggerates the trends. I usually keep an eye on the 3-month and 6-month annualized trends, and as of May they were both sitting at 2.2% using seasonally-adjusted data.

You're right: the core isn't seasonally-adjusted. That's news to me.

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