Canada’s inflation decelerates; sets stage for rate cuts
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Another positive inflation reading this morning that sets the stage for the Bank of Canada to start a rate cutting cycle as early as next month.
Statistics Canada reported inflation – on a year-over-year basis – fell to 2.7 per cent in April. That’s the lowest since March 2021. Inflation has come in below three per cent in every month of 2024, after averaging 3.9 per cent last year.
Underlying price pressure readings that are closely monitored by the Bank of Canada are also showing relatively benign data for inflation.
While inflation still remains above the central bank’s two per cent target, the Bank of Canada will start lowering interest rates as long as it believes inflation is on a path to those levels.
Markets are pricing in a 50-50 chance the Bank of Canada will cut interest rates as soon as its June 5 policy decision.
Economists are anticipating we will get as many as six rate cuts over the next 18 months, lowering interest rates by about 1.5 percentage points.
