Inflation continues to cool. So is the Bank of Canada ready for rate cuts? - National | (2024)

Economists and market watchers are firming up their bets for Bank of Canada interest rate cuts after another soft inflation report showed more signs of easing price pressures.

Inflation continues to cool. So is the Bank of Canada ready for rate cuts? - National | (1)

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

Inflation on food bought from the grocery store slowed to 1.4 per cent annually last month, down from 1.9 per cent in March, according to the agency.

Inflation continues to cool. So is the Bank of Canada ready for rate cuts? - National | (2)

Looming interest rate decision

Slowdowns in annual price growth for meat, non-alcoholic beverages and bakery and cereal products helped to pull down the yearly inflation rate, StatCan said. Fruits, nuts and seafood products meanwhile saw annual price declines.

Story continues below advertisem*nt

Taking a longer view, the agency noted that prices at the grocery store had jumped 21.4 per cent from April 2021.

Household furnishings and the clothing and footwear categories saw outright declines in prices year-over-year, according to StatCan.

Inflation continues to cool. So is the Bank of Canada ready for rate cuts? - National | (3)

Poilievre accuses Freeland of not knowing target inflation rate

But gas prices were growing at a faster annual pace as consumers paid 7.9 per cent more month-to-month in April. Higher global oil prices, gas stations switching to more expensive summer blends and a hike in the federal carbon levy contributed to the gain, StatCan said.

Rising costs for rent and homeowners renewing their mortgages continue to put upward pressure on shelter inflation.

April was particularly difficult for renters in Alberta, according to the agency. Rent prices were up 16.2 per cent year-over-year in the province, almost double the 8.2 per cent hike nationally.

Prices rose on a month-to-month basis in April, but because the jump was smaller than the same time last year, the overall inflation rate slowed from 2.9 per cent in March.

Randall Bartlett, senior director of Canadian economics at Desjardins, told Global News in an interview that everything is “trending in the right direction” when it comes to inflation.

Inflation continues to cool. So is the Bank of Canada ready for rate cuts? - National | (4)

Can renters achieve financial security without home ownership?

While shelter remains “red hot” and gas prices are putting pressure on the consumer price index, he said there is otherwise “broad-based” deceleration in inflation.

Financial news and insights delivered to your email every Saturday.

“It really is a story now of largely one or two sectors that are driving a big part of what we’re seeing in terms of the headline (inflation number),” he said.

April’s report marks the fourth consecutive “tame” reading for the annual inflation index, 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.

Story continues below advertisem*nt

Inflation continues to cool. So is the Bank of Canada ready for rate cuts? - National | (5)

Business Matters: Alternative grocery options see boost during Loblaw boycott

'The door is open' for a June rate cut

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

The Bank of Canada has said it wants to see signs that the easing in underlying inflation will be sustained before it’s ready to deliver cuts to its benchmark interest rate.

Story continues below advertisem*nt

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

Grantham pointed to Bank of Canada governor Tiff Macklem’s remarks at the time of the central bank’s April rate hold, where he said monetary policymakers were “encouraged” by recent progress but needed more signs of persistent cooling. Since then, the Bank of Canada has gotten two solid inflation reports showing more easing, he noted.

Inflation continues to cool. So is the Bank of Canada ready for rate cuts? - National | (6)

Bank of Canada holds key rate, signals June cut in the ‘realm of possibilities’

Porter said the soft April inflation report means “the door is open” for a rate cut, “but it remains a close call.” Porter said BMO has been leaning towards a June rate cut for the past six months.

TD Bank’s managing director and senior economist Leslie Preston said in a note that with core inflation still close to the top bound of the Bank of Canada’s one-to-three per cent target range, she believes the central bank will want to be patient and lean towards a July rate cut rather than June.

Story continues below advertisem*nt

After the data’s release, money markets increased their bets for a June rate cut to almost 55 per cent from 39 per cent earlier, according to Reuters.

Trending Now

  • Richard Dreyfuss’ bigoted rant at ‘Jaws’ event had attendees walking out
  • ‘Serial slingshot shooter,’ 81, terrorized neighbours for a decade: police

Bartlett is also in the camp for a June cut. He told Global News that he expects the Bank of Canada will be “satisfied” with this inflation report.

He noted however that the April jobs report was surprisingly strong, which may “cast some doubt” among forecasters about whether there’s been enough easing in the labour market to loosen monetary policy. But there were also signs of slowing in annual wage growth last month, he added, and other economic indicators are also pointing towards diminishing inflationary pressure going forward.

“When you take this all into account – the inflation, GDP growth, labour market, plus things like business insolvencies, survey data from the Bank of Canada and elsewhere – overall, it points to the most likely date of a cut being at their June meeting,” Bartlett said.

Inflation continues to cool. So is the Bank of Canada ready for rate cuts? - National | (9)

Canada’s economy loses momentum in February. What does this mean for inflation and interest rates?

Whether the Bank of Canada cuts in June, July or beyond, Bartlett said he doesn’t expect the pace of easing to be as rapid as the tightening that saw a jump of 4.75 percentage points in the policy rate over roughly two years.

Story continues below advertisem*nt

Instead, he said the central bank is likely to pay close attention meeting-to-meeting whether short-term data is continuing to show disinflationary forces working their way through the economy. Future rate decisions could fluctuate between a rate hold or a small decrease of 25 basis points, he said.

The pace of interest rate cuts from the U.S. Federal Reserve will also hold some bearing on the Bank of Canada, as Bartlett said the Canadian central bank will not want to diverge too far from its American counterpart, lest the loonie depreciate and fuel inflation on imports from south of the border.

“We think it’s going to be a cautious approach to gradually cutting interest rates just to make sure inflation gets back down to target,” he said.

Inflation debate in Parliament

Inflation now stands at its lowest point in three years. Speaking to reporters on Tuesday, Finance Minister Chrystia Freeland said the April report was “really good news for all Canadians,” noting annual wage growth had outpaced inflation for more than a year.

Story continues below advertisem*nt

Later in the day in question period, Conservative Leader Pierre Poilievre chastised the Liberals for celebrating that inflation remains above the central bank’s target of two per cent. He reiterated his call for the Liberal government to suspend taxes on gas and diesel until Labour Day to provide immediate relief at the pumps.

In response, Freeland claimed that Poilievre was ignorant of the Bank of Canada’s target range of one-to-three per cent, where annual price increase have floated for the first four months of the year.

The Bank of Canada is mandated to keep inflation at the midpoint of the one-to-three per cent target control range, or two per cent. The mandate, renewed at the end of 2021, allows the central bank to use the “flexibility” of the one-to-three per cent range in a few cases, including promoting maximum sustainable employment when conditions warrant.

But Governor Macklem has made clear in previous statements the central bank will only be satisfied once inflation is all the way back down to two per cent, and will use its independent monetary policy to get there.

Inflation continues to cool. So is the Bank of Canada ready for rate cuts? - National | (10)

Freeland warns Poilievre’s past calls to fire BOC governor were ‘reckless and irresponsible’

Inflation continues to cool. So is the Bank of Canada ready for rate cuts? - National | (2024)


Inflation continues to cool. So is the Bank of Canada ready for rate cuts? - National | ›

All of the central bank's preferred metrics of “core” inflation also cooled below three per cent in April, according to StatCan's report. The Bank of Canada has said it wants to see signs that the easing in underlying inflation will be sustained before it's ready to deliver cuts to its benchmark interest rate.

Has inflation cooled in Canada? ›

At 2.7 per cent - slowest since March 2021 - inflation is running slightly cooler than the Bank of Canada's forecast for it stay around 3 per cent in the first half of 2024, before cooling down to 2.2 per cent by the end of the year.

Is inflation getting worse in Canada? ›

Meanwhile, the official inflation total over the last three years is around 14% since January 2021. That's only 3.41% in 2021, 6.8% in 2022, and 3.4% in 2023.

What is the Bank of Canada doing to reduce inflation? ›

Influencing short-term interest rates

If inflation is above target, the Bank may raise the policy rate. Doing so encourages financial institutions to increase interest rates on their loans and mortgages, discouraging borrowing and spending and thereby easing the upward pressure on prices.

What is the inflation rate in Canada right now? ›

Current Canada Inflation Rate: 2.7%

Updated on May 21, 2024: April inflation declined to 2.7% compared to 2.9% in March.

Has inflation cooled off? ›

Inflation inched downward in April, with prices rising by 3.4% on average in the last 12 months, down from 3.5% in March, according to the latest release of the Consumer Price Index on Wednesday. Although slight, it's the first time the pace of inflation has declined in 2024.

Is deflation coming to Canada? ›

For now, the central bank's worries are far-removed from fears of deflation. Canada's annual inflation rate was 6.3 per cent in December, a noticeable improvement from the month prior but still too high for the Bank of Canada's comfort.

How much is Canada in debt in 2024? ›

Since 2007/08, combined federal and provincial net debt (inflation-adjusted) has nearly doubled from $1.18 trillion to a projected $2.18 trillion in 2023/24. Between 2019/20 (the last year before COVID) and 2023/24, the combined federal-provincial debt-to- GDP ratio is expected to grow from 65.7% to 76.2%.

Why is food so expensive in Canada? ›

Many complex contributing factors to food inflation—extreme weather events, global supply chain issues, geopolitical instability, high energy costs and a weak Canadian dollar compared to the U.S.—are impossible to control. However, grocery store pricing is under the purview of individual retailers.

What is the interest rate outlook for 2024 in Canada? ›

As of June 2, the BoC prime rate is at 5% and markets are forecasting: July 2024: 4.75% October 2024: 4.50% March 2025: 4.25%

Who owns the Bank of Canada? ›

The Bank of Canada is a special type of Crown corporation, owned by the federal government, but with considerable independence to carry out its responsibilities. The Governor and Senior Deputy Governor are appointed by the Bank's Board of Directors (with the approval of Cabinet), not by the federal government.

Who controls inflation in Canada? ›

Agreement on the inflation-control target

In 1991, the Bank of Canada and the Minister of Finance agreed on an inflation-control target framework to guide Canadian monetary policy. The target agreement has been renewed several times since, most recently in 2021 to the end of 2026.

Is Canada in a recession? ›

Canada avoided the recession expected by many forecasters (Chart 3), with real GDP rising by 1.1 per cent in 2023, over three times higher than what was forecasted in Budget 2023 (0.3 per cent). Canada's economy is growing.

Which country has the highest inflation rate? ›

Top 10 Countries with the Highest Inflation Rates (Trading Economics Jan 2022) With an inflation rate that has soared above one million percent in recent years, Venezuela has the highest inflation rate in the world.

What is the cost of living in Canada over the years? ›

During the observation period from 1960 to 2022, the average inflation rate was 3.8% per year. Overall, the price increase was 886.36%. An item that cost 100 dollars in 1960 costs 986.36 dollars at the beginning of 2023. For November 2023, the year-over-year inflation rate was 3.12%.

How bad is inflation right now? ›

A 3.4% inflation rate may not seem like a lot, or as much as the price changes you've noticed at the grocery store. But to put inflation in context over the last few years, consumer price inflation rose 19.32% between January 2020 and April 2024, and particularly high housing costs persist.

What is the US inflation rate right now? ›

US Inflation Rate (I:USIR)

US Inflation Rate is at 3.36%, compared to 3.48% last month and 4.93% last year. This is higher than the long term average of 3.28%. The US Inflation Rate is the percentage in which a chosen basket of goods and services purchased in the US increases in price over a year.

What is the cost of living in Canada? ›

What is the average monthly cost of living in Canada? The average cost of living in Canada is $2,329.94 per month. Canada is a big and diverse country in North America, with Ottawa as its capital. It's known for its good quality of life, government transparency, education, and healthcare.


Top Articles
Latest Posts
Article information

Author: Amb. Frankie Simonis

Last Updated:

Views: 6251

Rating: 4.6 / 5 (56 voted)

Reviews: 95% of readers found this page helpful

Author information

Name: Amb. Frankie Simonis

Birthday: 1998-02-19

Address: 64841 Delmar Isle, North Wiley, OR 74073

Phone: +17844167847676

Job: Forward IT Agent

Hobby: LARPing, Kitesurfing, Sewing, Digital arts, Sand art, Gardening, Dance

Introduction: My name is Amb. Frankie Simonis, I am a hilarious, enchanting, energetic, cooperative, innocent, cute, joyous person who loves writing and wants to share my knowledge and understanding with you.