Many economists warn that the June inflation report does not deliver a catalyst that stimulates the Canada Bank to start reducing interest rates again.
Statistics Canada launches on Tuesday the consumer price index (CPI) for June and economists are asking that the general inflation rate accelerate 1.9 percent of 1.7 percent in May.
“For those looking for imminent cuts (Bank of Canada), we doubt that June IPC data offers a lot of support,” said Nick Rees, Macro Manager of Monex Europe Holdings Ltd., in a note. “In July, bets of a cut to exchange markets seem too aggressive, in the absence of greater disinflation progress,” said Rees.
The next decision of the interest rate of the Bank of Canada is July 30. He wants inflation to decrease even more before they resume, since the lowest rates tend to feed the consumer’s demand and can make prices increase.
Rees said that inflation meters that the Canada Bank will track more closely, it is expected that the Central finish and the medium IPC) maintain around three percent, which is located at the upper end of the policy formulators range.
RBC Economics published a similar estimate for preferred inflation measures of the Bank of Canada, which eliminate indirect taxes.
“We expect increases month by month in the average and average measures close to the increases of 0.2 percent published for both in May. That would leave little the annual May rates and would still be significantly above the inflation target of two percent of (Bank of Canada),” Nathan Janzen, an assistant economist of RBC of RBC, said on Friday.
RBC also said that in the absence of food and energy, it expects the inflation of the title to accelerate 2.7 percent in June 2.6 percent in May.
The main inflation, the figure year after year that captures the entire Basket of IPC goods, remained stable in May at 1.7 percent compared to April, but was significantly fresher than 2.6 percent published in February.
However, the preferred inflation measures of the Central Bank have accelerated since the end of last year, 2.5 percent to three percent year after year.
“We are focused on ensuring that Canadians continue to have confidence in prices stability during this period of global agitation,” said the Bank of Canada in a statement that accompanies their last rate announcement on June 4. “We will support economic growth while ensuring that inflation remains well controlled.”
Policy formulators have kept rates at 2.75 percent in each of the last two ads after embarking on a cutting campaign in June 2024, when the rates were five percent.
During a recent speech at the St. John Board of Commerce, the Governor of the Bank of Canada, Tiff Macklem, said tariffs are key to prices and inflation.
But economists say there is still a lack of clarity about the effects that tariffs have had on the economy.
“We hope it is too soon to see a significant increase in prices due to tariffs in Canadian and American inflation data for June for Tuesday,” said Janzen.
He said there were signs that tariffs are causing food prices and cars to increase as Canada imposed some retaliation levies on US goods and cars made by the United States.
But “the broader impact of prices tariffs has been limited,” said Janzen, added that Canada stopped tariffs on many US imports directed to avoid reaching companies and consumers.
Almost 60 percent of the imports from the USA. Which were run over by Canadian back cover collectors were eligible for relief, according to an Oxford Economics Ltd. report at the beginning of June. A more recent RBC report placed that figure at 86 percent.
Derek Holt, vice president and chief of economy of capital markets at the Bank of Nueva Scotia, in a note on Monday, said that the effects of tariffs can be extended in “multiple rooms”, and added that “it is a slightly mysterious mystery of why Governor Macklem would put such an emphasis after two CPI reports before the decision of July 30”.
He said that the longer the rates pass, the more slack that will create in the economy, an “matter” that could extend for one or two years.
“The competitive effects of tariffs on Canadian inflation require that evaluating much more than two months of bad data.
RBC has previously said that he believes that the Bank of Canada has finished reducing rates for this cycle.
Rees, however, said that more cuts could arrive, possibly at the end of this year.
“We still see the margin for a rate cut in September, but only after clearer signs that the recent increase in prices growth has begun to relax, allowing the (Canada Bank) to be recounted on weakness in other parts of the macro data,” he said.
• Email: gmvsuhanic@postmedia.com
