Economists split on what inflation numbers mean for Bank of Canada rate cut
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Inflation growth held steady in May at 1.7 per cent year over year, but economists are split on whether it provides enough evidence for the Bank of Canada to cut rates at its next policy meeting in July.
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Core CPI-median and CPI-trim inflation grew three per cent in May, down from 3.2 per cent and 3.1 per cent in April, respectively, matching analyst estimates while remaining well above the Bank of Canada's inflation target of two per cent.
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Bank of Canada policymakers have made it clear that their attention is focused on inflation and the possibility that tariffs could cause another spike.
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The Bank of Canada's target range for inflation is one per cent to three per cent.
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Here's what economists think the latest inflation numbers mean for the Bank of Canada and interest rates.
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An ongoing pullback in rent and mortgage costs will help counter the effects of tariffs on the price of goods, Katherine Judge, an economist at CIBC Capital Markets, said.
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The cost of food boosted the Bank of Canada's favoured core inflation measures, but the price of groceries 'sharply' fell last month.
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'The appreciation in the Canadian dollar over the last few months is helping to contain food prices amidst tariffs,' she said in a note.
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Canada has a lot of exemptions on its counter tariffs on the U.S., so the effects of U.S. levies are mostly on finished goods, such as vehicles and some food.
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'Tariff impacts will become more evident in the releases ahead, but we look for waning demand tied to the rise in the unemployment rate to provide an offset, along with the appreciation in the Canadian dollar, and a deceleration in shelter inflation,' Judge said.
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Article content Inflation growth held steady in May at 1.7 per cent year over year, but economists are split on whether it provides enough evidence for the Bank of Canada to cut rates at its next policy meeting in July. Article content Core CPI-median and CPI-trim inflation grew three per cent in May, down from 3.2 per cent and 3.1 per cent in April, respectively, matching analyst estimates while remaining well above the Bank of Canada's inflation target of two per cent. Article content Article content Bank of Canada policymakers have made it clear that their attention is focused on inflation and the possibility that tariffs could cause another spike. Article content Article content The Bank of Canada's target range for inflation is one per cent to three per cent. Article content Here's what economists think the latest inflation numbers mean for the Bank of Canada and interest rates. Article content An ongoing pullback in rent and mortgage costs will help counter the effects of tariffs on the price of goods, Katherine Judge, an economist at CIBC Capital Markets, said. Article content The cost of food boosted the Bank of Canada's favoured core inflation measures, but the price of groceries 'sharply' fell last month. Article content 'The appreciation in the Canadian dollar over the last few months is helping to contain food prices amidst tariffs,' she said in a note. Article content Article content Canada has a lot of exemptions on its counter tariffs on the U.S., so the effects of U.S. levies are mostly on finished goods, such as vehicles and some food. Article content 'Tariff impacts will become more evident in the releases ahead, but we look for waning demand tied to the rise in the unemployment rate to provide an offset, along with the appreciation in the Canadian dollar, and a deceleration in shelter inflation,' Judge said.
