The central bank will observe the impact of tariff disputes on inflation as it draws future policy decisions.
When will the next BOC announcement be?
Bank of Canada’s next interest rate decision is scheduled for July 30, along with a new monetary policy report. Avery Shenfeld, chief economist at CIBC, said in a note to clients on Wednesday that he expected to lower interest rates by a quarter in July if the job market shows more cracks and inflation. He said he cut again in September, reducing the policy rate to 2.25%.
While the economy exceeded Canadian banks’ expectations in the first quarter of the year, and annual inflation fell below 2% in April, the central bank said it saw the focus of headlines.
What is the inflation rate in Canada?
Inflation fell to 1.7% in April, thanks in large part to the federal government’s elimination of consumer carbon prices, which lowered the price of gasoline pumps. If taxes are not included, inflation for the month would be 2.3%, higher than 2.1% in March and exceeded central bank expectations.
The central bank said there was some “unexpected solidity” in the latest price data, especially as core inflation figures rose.
While “it’s too early” to see the impact of retaliatory tariffs in consumer price data, signs of recovery on potential stress “may reflect the impact of trade disruptions”, McClem said.
Will Canadian banks cut more?
Douglas Porter, chief economist at BMO, said that although the central bank’s decision shows it is not eager for further cuts.
He said that even if inflation slows down, the expected economic slowdown has left the door “opening” to cut in July.
