The Daily Chase: Decision day at the Bank of Canada, U.S. inflation heats up

Here are five things you need to know this morning.

Decision day at the Bank of Canada: Canada’s central bank is set to reveal its latest interest rate decision, and while no change to the policy rate is expected, it will be fascinating to parse the bank’s statement and accompanying press conference for an insight into their line of thinking. The official inflation rate has been below three per cent for the past two months, something that hasn’t happened in more than two years. All things being equal, the surprising loss of jobs in last month’s Labour Force Survey also increased the likelihood of a cut sooner rather than later, but after taking heat for being slow to raise rates in the first place, leadership at the bank, including Tiff Macklem, are going to want to be absolutely confident that inflation won’t flare up again before stepping off the sidelines. Market expectations are saying loudly and clearly they’re expecting that to happen in June at the earliest, with July the odds-on favourite.

U.S. inflation data: While a rate cut is ever so faintly on the table in Canada, it’s looking a little more distant in the U.S., after the latest inflation data came out this morning, showing the cost of living there is still headed in the wrong direction for policymakers. The headline rate rose to 3.5 per cent from 3.2 previously, while the so-called core rate that strips out volatile items like food and energy came in ever higher at 3.8 per cent. Cut expectations fell immediately following the release of the numbers, and the market is now pricing in just two cuts between now and the end of the year. As recently as January, as many as five were expected. Brian Rose, senior U.S. economist for UBS, told BNN Bloomberg’s The Street this morning that there was very little good news in the numbers for the rate cut crowd, adding that the data came in “at an uncomfortable level for the Fed.”

Gold a big seller for Costco: When big box retailer Costco started selling gold bars last summer, the story went viral for what it was saying about the state of the economy. By the end of last year, the company had revealed in its earnings it was selling US$100 million worth of bars a month, and in a note to clients this week, analysts at Wells Fargo say they think that pace is actually picking up. Edward Kelly, an equity analyst at the bank who covers the company, said in a note to clients Tuesday he thinks the company is probably selling almost $200 million worth of gold every month. When it comes to boosting topline sales, a $2,000 gold brick does a lot more heavy lifting than their famous $1.50 hot dogs do, but the zeal for gold likely isn’t doing much to add to the company’s profit. Even with an estimated two per cent mark-up from the spot price, “pricing at that level and shipping costs suggests it’s a very low profit business at best,” Kelly wrote, according to media reports. Gold price has been on a tear of late, gaining almost 20 per cent in the last month to a new all-time high above $2,300 an ounce.