AMERICAS OIL: Sub-$60 Oil Would Undercut US Shale Production, Citigroup Says:BBG

Fed Chair Powell tells the House Financial Services Committee today's CPI data for January suggests the Fed isn't "quite there" in terms of reaching the 2% inflation target:

• "I would say we're close, but not there on inflation. And you did see today's inflation print which says the same thing. I mean, we made great progress toward 2% last year, inflation was 2.6%, so great progress, but we're not quite there yet, so we want to keep policy restrictive for now."
• Note that Powell still characterizes policy as "restrictive" (in his prepared statement he reiterated that after 100bp of Fed funds cuts, policy was "significantly less restrictive than it had been").

The latest opinion polling from Léger shows a stark turnaround in support for the governing centre-left Liberal Party of Canada (LPC), which has seen its polling scores rise significantly in recent weeks amid the resignation of PM Justin Trudeau and the aggressive rhetoric towards the country from US President Donald Trump. The PM has again addressed Trump's comments about the potential annexation of Canada and the country becoming the '51st state' of the US, saying conversations about the idea are " nonstarter" and that "It's never going to happen."

• Trump's comments continue to spur a consumer backlash in Canada, with reports of boycotts of US-made products and Canadians cancelling visits to the US.
• A 'rally round the flag' effect appears to be bolstering support for the incumbent party, while also eating into that of the centre-right Conservative Party of Canada (CPC).
• Léger,Federal election poll, Fieldwork 7-10 Feb. Conservatives: 40% (-7), Liberals 31% (+10), New Democratic Party: 14% (-3), Bloc Quebecois: 7% (-2), Green Party: 6% (+2). Chgs w/13 Jan
• Same question as above with former BoC and BoE governor Mark Carney as LPC leader, returned support levels of: LPC 37%, CPC 37%, NDP 12%.
• Given that Carney is frontrunner to take over the party leadership in March, this could radically alter the outlook ahead of the next federal election due by October at the latest. Political and market assumptions had been for a comfortable CPC majority post-election, but if the current trend continues this may no longer prove the base-case scenario. 

Chart 1. Federal Election Opinion Polling, %

Source: Léger, MNI

• Within the CPI details, the share of the CPI basket growing in excess of 3% Y/Y (in the unrevised NSA data) nudged up from 27.6% to 29.5%. It averaged 24% in 2019 and 19% in 2015-19.
• Within core though, the goods share remained very low at 12.5% (18.5% 2019, 12% 2015-19) whilst the services share eased further to 55% for fresh low since Jan 2022 (38% 2019, 34% 2015-19) having been 58% in Dec and 68% in Nov.
• This follows the monthly data showing surprise seasonally adjusted strength in core services although the Y/Y still eased a tenth further to 4.3% Y/Y. That’s also the lowest since Jan 2022 although the dispersion measure had until the past few months proved stickier – see charts.