Consumer price inflation has been quiescent so far in this recovery, despite some of the loosest monetary policy in history – and this week is expected to provide more evidence of the surprisingly tame outlook for price increases.
Economists expect U.S. and Canadian consumer price data for January will continue the recent pattern of showing practically no upward price pressure, although there is a chance of a modest pickup next month because of rising gasoline prices.
The lack of inflation continues to confound many analysts because of the huge volume of money printing by the U.S. Federal Reserve Board, which is creating $85-billion (U.S.) of freshly minted money every month through its asset purchasing program, known as quantitative easing. Interest rates in both Canada and the U.S. are at generational lows, which normally would stimulate consumer spending and increase price pressures.
First up will be the U.S. CPI, set for release on Thursday morning.
The consensus forecast is for a rise of a mere 0.1 per cent for the month, up slightly from the unchanged figure in December. That would take the annual rate to a six-month low of 1.6 per cent.
Forecasters do not see signs of a pick up in inflation, at least over the near term.
"In the coming months, we expect inflation momentum to remain relatively subdued, as the combination of the weak labour market recovery and subdued economic growth momentum continues to temper inflation expectations," TD Economics said in a note to clients.
Canadian CPI figures will be issued Friday and are expected to show consumer prices almost unchanged amid a weak economic backdrop.
TD expects prices rose 0.1 per cent in January, which would take the year-over-year headline inflation rate down to 0.5 per cent and a multiyear low.
"This would mark the slowest rate of inflation since October 2009," the bank said.
Gasoline prices are rising in Canada, but restrained increases elsewhere are keeping the overall consumer price index in check.
The lack of inflation suggests that interest rates will not be rising any time soon.
"We expect that until growth returns to an above-trend rate – likely in the second half of the year – core inflation will remain comfortably below the [Bank of Canada's] target, ensuring that the overnight rate will remain unchanged until 2014," TD said.