Inflation data not as 'disappointing' as Oilers game — but close

financialpost.com:

May’s inflation rate came in surprisingly high, leading some economists to cast doubt on their predictions of a second interest rate cut next month.

Statistics Canada on Tuesday said inflation accelerated to 2.9 per cent for May, beating economists’ expectations of further easing from April’s 2.7 per cent increase.

The jump puts inflation on the upper edge of the Bank of Canada’s target range of between one per cent and three per cent.

Given the surprise figures, economists are now rethinking their interest rate predictions for the year. Here’s what some of them had to say about the announcement:

Andrew DiCapua, a senior economist at the Canadian Chamber of Commerce, said the Bank of Canada is now likely to pause at its July meeting.

“Not the best news on the Canadian front this morning,” he said in a note. “The increase in services inflation is not helpful, especially as wage growth is elevated. The risk of a strong rebound in the housing market hasn’t materialized yet, but slowing shelter inflation is welcome news.”

DiCapua said the odds of a July cut are lower, but the final decision will still depend on the central bank’s economic forecasts.

“The (Bank of Canada) will want to take a slow and measured approach, especially with inflation accelerating,” he said. “This bumpy road on inflation could keep the bank overly restrictive for the Canadian economy risking any soft landing.”

The strong monthly gains on some core measures are “cause for concern,” according to Olivia Cross, a North America economist at Capital Economics Ltd.

“However, with some of that strength due to factors that are likely to be one-offs, and given there is another CPI report before the late July meeting, for now we are sticking with our view that