Live updates: Canada’s inflation rate eased to 2.7% in June

8:30 a.m

Canada’s inflation rate eased to 2.7% in June: Statscan

Canada’s inflation rate eased by more than expected last month. The Consumer Price Index rose 2.7 per cent in June from a year earlier, down from 2.9 per cent in May. Financial analysts were expecting an inflation rate of 2.8 per cent.

– Matt Lundy

7 a.m.

June inflation report to be released today

Will the Bank of Canada cut interest rates again next week? The answer may come Tuesday morning, when Statistics Canada publishes inflation figures for June.

Financial analysts are expecting a slight moderation in Consumer Price Index growth. The median estimate is for the annual inflation rate to ease to 2.8 per cent in June from 2.9 per cent in May. That would mark the sixth consecutive month that inflation has fallen within the central bank’s target range of 1 per cent to 3 per cent.

So far this year, inflation figures have been softer than expected, prompting the Bank of Canada to cut its key interest rate to 4.75 per cent from 5 per cent – the first decline in four years.

However, the May inflation numbers were surprisingly strong, casting some doubt over whether the bank will cut again on July 24 or wait until Sept. 4.

Bank of Canada Governor Tiff Macklem has stressed that rate reductions could be gradual, with monetary policy decisions hinging on economic data.

On various fronts, the data are weak, counteracting the flare-up in consumer prices in May. For example, hiring stalled in June and the unemployment rate rose to 6.4 per cent – the highest level since October, 2017, not including the first two years of the pandemic.

Heading into Tuesday’s CPI report, investors are leaning heavily toward a July cut. Traders are indicating there’s an 83-per-cent chance that the BoC trims its policy rate by a quarter-point next week, according to Bloomberg data.

“If we’re judging the ‘quality’ of these inflation reports based on month-to-month movements in the broad array of core CPI measures, then the May report was the first bad one after four good ones in a row from January through April,” Bank of Montreal senior economist Robert Kavcic said in a client note. (Measures of core inflation aim to give a better sense of underlying inflation by removing products and services with volatile price swings.)

“So, a favourable June print would leave the running tally at five-of-six on the good side, which could very well justify further rate cuts,” Mr. Kavcic continued. “But, a second bad print would become less of an anomaly and more of a concerning trend, arguing for some caution.”

– Matt Lundy