'A big positive shift': What economists say about Canada's inflation numbers
Canada’s inflation rate for January decelerated to 2.9 per cent, dropping more than economists were predicting and possibly opening a window for the Bank of Canada to start cutting rates as early as June. Here’s what economists are saying about the numbers.
The Bank of Canada will be pleased with January’s inflation report, and not just because the headline rate slowed more than expected, said Olivia Cross, North America economist at Capital Economics.
“The Bank of Canada will be pleased to see the more marked easing in its measures of core inflation,” Cross said, in a note following the release of data on Feb. 20 by Statistics Canada.
Month-over-month core inflation rose 0.1 per cent excluding food and energy, slower than the 0.3 per cent gain in December.
The Bank of Canada‘s preferred measures — CPI-trim and CPI-median — both slowed to 3.4 per cent and 3.3 per cent respectively, from 3.7 per cent and 3.5 per cent.
Still, Cross sounded a note of caution.
“January’s inflation print was a big positive shift in the right direction, but the Bank of Canada will need to see this trend continue before it will be comfortable pivoting to rate cuts,” she said. “After all, we saw headline inflation fall below three per cent in June, but this was followed by a series of sticker inflation prints.”
Capital expects the first rate cut to come at the central bank’s June 5 meeting.
There was plenty of evidence in the latest inflation reading that elevated interest rates are starting to cut into discretionary consumer spending, said Andrew Grantham, an economist with Canadian Imperial Bank of Canada.
“The unexpectedly large declines in airline fares and clothing prices may be a sign of weakness in consumer spending, but could also partly
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