Inflation data 'all clear' for Bank of Canada interest rate cut in June, economists say
With inflation cooling to a three-year low in April, some economists are now all but guaranteeing that the first interest rate cut of the Bank of Canada‘s tightening cycle will come in June.
On Tuesday, Statistics Canada reported that Canada’s annual inflation rate fell to 2.7 per cent in April, down from 2.9 per cent a month prior.
Andrew Grantham, executive director of economics at CIBC, said the data “provided the all clear” for the Bank of Canada to begin cutting rates.
“At the time of the April interest rate decision, the Bank of Canada Governor stated that policymakers were encouraged by recent subdued inflation readings, but needed those to persist for longer before cutting interest rates,” he wrote in a note to clients.
“Since then we have received two more months of data pointing to tame underlying inflation, for a total of four in a row, and because of that we continue to forecast a first rate cut at the next meeting in June.”
Andrew DiCapua, senior economist at the Canadian Chamber of Commerce, said Tuesday’s data should give the Bank of Canada more confidence that inflation is stable.
“A rate cut in June is not just possible; it’s becoming the main consideration,” he said.
Tu Nguyen, an economist with RSM Canada, said a June rate cut is now a “no-brainer.”
“As the economy dragged along and headline inflation fell in the 1-3 per cent range for the fourth month in a row, there is really no reason for the Bank of Canada to wait until July,” she said. “The Bank of Canada had wanted to see evidence of sustained disinflation, and April’s data sent a loud and clear message that disinflation is here to stay.”
Douglas Porter, chief economist with the Bank of Montreal, said it’s more of what the “doctor ordered.”
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