Economists predict a potential rate cut as energy prices drop and food cost increases slow down
Statistics Canada reported that the annual inflation rate in Canada fell to a 2.7 per cent annualized rate in April, down from 2.9 per cent in March.
This marks the lowest inflation rate since August 2021, largely due to decreases in energy prices and slower increases in food costs.
The Consumer Price Index (CPI) data shows that gasoline prices dropped by 7.7 percent year-over-year, significantly contributing to the overall reduction in inflation. Additionally, the cost of groceries rose by 9.1 percent, still high but a deceleration from previous months.
According to BNN Bloomberg, economists suggest that the slowing inflation could prompt the Bank of Canada (BoC) to consider cutting interest rates in June.
The central bank has been cautious, monitoring economic indicators closely before making policy changes. However, the latest CPI figures indicate that inflationary pressures are easing, providing room for potential monetary easing.
The BoC's next policy announcement is scheduled for June 7. Analysts believe that if inflation continues to trend downward, a rate cut could support economic growth and help maintain price stability.
The central bank aims to bring inflation back to its 2 percent target while ensuring economic recovery remains on track.
Market expectations have already shifted, with bond yields falling and the Canadian dollar weakening slightly in anticipation of a potential rate cut.
Financial markets will closely watch upcoming economic data releases, including employment figures and GDP growth, to gauge the likelihood of a change in monetary policy.
