Canada’s annual inflation rate eased to 2.7% in April, meeting analyst expectations and increasing chances for a potential interest rate cut by the Bank of Canada (BoC) in June. This decline, driven by slower price growth in food, services, and durable goods, was somewhat offset by rising gasoline prices, which jumped 6.1% in April. Excluding gasoline, the CPI increased by 2.5%.
Analysts see this as a green light for the BoC to start easing monetary policy. The April CPI report, being the last major data release before the BoC’s June 5 rate decision, shows a consistent trend of cooling core inflation. For instance, CPI-median dropped from 2.9% in March to 2.6% in April, while CPI-trim fell from 3.2% to 2.9%. Money markets now put the odds of a June rate cut at 50%, up from 39% prior to the data.
The central bank, which has held its benchmark rate at 5% since last June, is cautious, seeking assurance that the inflation slowdown isn’t temporary. The cooling inflation rate in April may give the BoC the necessary confidence to consider reducing interest rates in June, potentially marking the beginning of a gradual easing of monetary policy.
