Inflation continues to cool. So is the Bank of Canada prepared to cut rates? – National

The annual inflation rate slowed to 2.7 per cent in April, Statistics Canada said on Tuesday, as cooling pressures on food prices offset higher fuel costs.

Inflation for food purchased at grocery stores slowed to 1.4 percent annually last month, down from 1.9 percent in March, according to the agency.

The slowdown in annual price growth for meat, non-alcoholic beverages, and baked goods and cereals helped reduce the annual inflation rate, StatCan said. Meanwhile, prices for fruits, nuts and seafood experienced annual declines.

From a broader perspective, the agency noted that prices in grocery stores had increased by 21.4 percent since April 2021.

According to StatCan, the home furnishings and clothing and footwear categories saw absolute price declines year over year.

But gasoline prices were growing at a faster annual rate as consumers paid 7.9 percent more month-over-month in April. Higher global oil prices, a shift by filling stations to more expensive summer blends and an increase in the federal carbon tax contributed to the gain, StatCan said.

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Rising rental costs and homeowners renewing their mortgages continue to put upward pressure on housing inflation.

April was particularly difficult for renters in Alberta, according to the agency. Rental prices rose 16.2 per cent year-over-year in the province, almost double the 8.2 per cent increase nationally.

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Prices rose month-over-month in April, but because the jump was smaller than the same period last year, the headline inflation rate slowed from 2.9 percent in March.

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The April report marks the fourth consecutive “tame” reading for the annual inflation rate, BMO chief economist Doug Porter said in a note to clients Tuesday morning. It also marks the final reading the Bank of Canada will get on price pressures ahead of its next interest rate decision on June 5.

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‘The door is open’ to a June rate cut

All of the central bank’s preferred “core” inflation metrics also cooled below three percent in April, according to the StatCan report.

The Bank of Canada has said it wants to see signs that the reduction in core inflation will be sustained before it is ready to make cuts to its benchmark interest rate.

“Today’s data should have made it clear on the inflation front that the Bank of Canada needed to start cutting interest rates in June,” CIBC chief economist Andrew Grantham said in a note to clients on Tuesday. .

Grantham referred to Bank of Canada Governor Tiff Macklem’s remarks at the time the central bank held the rate on hold in April, where she said policymakers were “encouraged” by recent progress but needed more. signs of persistent cooling. Since then, the Bank of Canada has received two strong inflation reports showing further easing, he noted.

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Porter said April’s weak inflation report means “the door is open” for a rate cut, “but it’s still close.” Porter said BMO has been leaning toward a June rate cut for the past six months.

TD Bank CEO and senior economist Leslie Preston said in a note that with core inflation still near the upper end of the Bank of Canada’s one to three per cent target range, she believes the central bank will want Be patient and efficient. towards a rate cut in July instead of June.

After the data was released, money markets increased their bets on a June rate cut to nearly 55 percent from 39 percent previously, according to Reuters.

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