Senior economists have come out with competing statements on the release of recent inflation numbers, agreeing that the deceleration in inflation currently underway, bodes well for the Bank of Canada to begin cutting interest rates in June.
The Conference Board of Canada says such a cut is “within the realm of possibilities,” while the Chartered Professional Accountants of Canada (CPA Canada) says the downward trend should be sufficient to inspire rate cutting action.
Economists from both organizations highlight trends in the labour market and the economy, with CPA Canada pointing out that these are growing more slowly than the country’s population. “This downward trend in inflation should be sufficient for the Bank of Canada to start cutting interest rates in June,” says CPA Canada’s chief economist, David-Alexandre Brassard.
In April, the Consumer Price Index (CPI) rose 2.7 per cent, a pullback from the 2.9 per cent year-over-year increase recorded in March. “April’s CPI figures were broadly positive despite the recent acceleration of gasoline prices. The rampant pace of food growth appears to be tamed,” writes the Conference Board’s senior economist of economic forecasting, Kiefer Van Mulligen. Brassard, meanwhile, points out that food inflation figures, now under three per cent for the first time since mid-2021, are particularly encouraging given that food inflation remained over five per cent in 2022 and 2023. He adds that rising shelter costs in Canada remain problematic.
“April’s CPI report adds weight to the thesis that interest rate cuts will begin in June,” Van Mulligen states. “In their last monetary policy announcement, the Bank of Canada’s Governing Council highlighted the need to see further evidence that core inflation was decelerating before they would consider cutting rates. April’s CPI figures were another positive step in that direction.”
