'Bank of Canada can't get too excited': What economists are saying about inflation numbers

financialpost.com:

Headline inflation slowed to 2.8 per cent in June, beating analyst estimates of a year-over-year increase of three per cent, but some economists warn it could again rise above three per cent in the months to come.

Statistics Canada said on July 18 most of the drop in the consumer price index (CPI) was a result of a 21.6 per cent decline in gasoline prices from last year. It said the “deceleration was fairly broad-based,” but said inflation was up four per cent, excluding gasoline.

June marked the first time since 2021 that CPI came in under the Bank of Canada’s target of one to three per cent, Statistics Canada said.

However, the central bank likely won’t be “too excited” by June’s reading, said Stephen Brown, deputy chief North American economist at Capital Economics. He expects a slowdown in energy inflation will likely “soon be reversed” and bring headline inflation back above three per cent.

Brown and others noted that readings for the bank’s preferred inflation measures remain stuck above three per cent — at an average of 3.8 per cent on an annual basis.

Further, almost half of the items included in the CPI basket rose five per cent year over year, said Charles St-Arnaud, chief economist at Albert Central, adding the share of items that rose more than three per cent increased 67 per cent.

“Little progress in the reduction in the percentage of components rising by more than three per cent and five per cent continues to worry the Bank of Canada as it is a sign that inflation remains broad-based,” he said.

Markets are currently pricing in a 30 per cent chance of an interest rate hike at the Bank of Canada’s next announcement on Sept. 6, according to Bloomberg.

Here’s what economists said about the latest inflation