Canada’s inflation rate decreased to 2.7% in April, suggesting a potential ease in monetary policy with the Bank of Canada (BoC) possibly cutting interest rates in June. According to Statistics Canada’s latest Consumer Price Index (CPI) release, the decline in inflation was attributed to lower price increases in food, services, and durable goods, although this was partially offset by a notable rise in gasoline prices, which grew by 6.1% in April.
Excluding gasoline, the CPI rose by 2.5% in April, aligning with analyst predictions cited by Reuters. This data has shifted market expectations, increasing the likelihood of a June rate cut from 39% to about 50%.
CIBC economist Andrew Grantham highlighted that the recent CPI figures provide the “all clear” for the BoC to consider reducing rates next month. This sentiment is based on the sustained progress in core inflation measures, which have shown moderation over the past several months. The CPI-median fell to 2.6% in April from 2.9% in March, and the CPI-trim dropped from 3.2% to 2.9%.
Desjardins’ Royce Mendes also noted the potential for “a small dose of rate relief” soon, reflecting a positive outlook for Canadian consumers facing inflationary pressures. The next BoC rate announcement is scheduled for June 5, where the central bank will decide on the appropriate monetary policy based on the latest economic data.