‘Welcome news’ on inflation raises odds Bank of Canada will cut interest rate in June

financialpost.com:

Canada’s inflation rate picked up slightly in March to 2.9 per cent from 2.8 per cent in February, Statistics Canada said Tuesday, but the consumer price index (CPI) release suggested that core inflation continued to slow.

Here’s what economists are saying about the latest numbers and what they could mean for the Bank of Canada, which has signalled that an interest rate cut is possible at its next meeting on June 5 if inflation continues to cool.

The latest consumer price index data meet the Bank of Canada’s requirement for core inflation, Andrew Grantham, an economist with CIBC Capital Markets, said in a note.

CPI core trim and median — the central bank’s two preferred measures of inflation — slowed to 3.1 per cent and 2.8 per cent, respectively, more than analysts surveyed by Bloomberg expected.

Bank officials said in their April 10 interest rate decision that they would need to see continued evidence that core inflation was sustainably slowing before they would consider a first rate cut.

“Today’s data meets that requirement, although there is one more CPI print to come before the bank’s next policy decision,” Grantham said. “We continue to expect a first cut at that June meeting.”

“This type of release was exactly what he (Bank of Canada governor Tiff Macklem) was looking for,” Royce Mendes, managing director and head of macro strategy at Desjardins Group, said in a note. “As a result, we are retaining our call for a rate cut in June.”

Besides the slowdown in the central bank’s preferred core measures, other results in the inflation report support a cut in June, Mendes said.

For example, the portion of components in the CPI basket rising more than three per cent shrank to 38 per cent from 41 per cent, while the share