Canada inflation cools more than expected in June
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TORONTO, July 16 (Reuters) - Canada's annual inflation rate cooled a tick more than expected to 2.7% in June, largely due to softer growth in gas prices, while core inflation measures were marginally down, data showed on Tuesday, ahead of the central bank's interest rate announcement next week.
Analysts polled by Reuters had forecast the inflation rate would tick down to 2.8% from 2.9% in May.
Market reaction: CAD/
Link: https://www150.statcan.gc.ca/n1/daily-quotidien/240716/dq240716a-eng.htm
COMMENTARY
STEPHEN BROWN, DEPUTY CHIEF NORTH AMERICA ECONOMIST, CAPITAL ECONOMICS
"The Bank of Canada's preferred CPI-trim and CPI-median measures of core prices rose at an above-target monthly pace for the second month running in June. Nonetheless, with the Bank’s Business Outlook Survey, released yesterday, pointing to much more disinflationary pressure in the pipeline, we still think the odds favour another interest rate cut next week."
ROYCE MENDES, DIRECTOR & HEAD OF MACRO STRATEGY AT DESJARDINS
"A return to tepid consumer price growth likely seals the deal for a follow up 25 bp (basis point) rate cut from the Bank of Canada next week. Along with significant declines in inflation expectations and a further normalization in corporate pricing behaviour, the latest inflation data build a strong case for continuing the rate cutting cycle without delay. That’s particularly true in light of the subdued survey responses from consumers and businesses about the outlook for the Canadian economy."
ANDREW KELVIN, HEAD OF CANADIAN AND GLOBAL RATES STRATEGY, TD SECURITIES
"I think this is enough combined with that soft survey data to allow the BoC to cut rates again next week. The fly in the ointment here is the acceleration in core inflation momentum. But with headline inflation below where they had forecast for Q2 in the April MPR, with a generally dovish read on the economy from the Business Outlook Survey, including falling wage and future inflation expectations, they should have all the pieces in place to cut rates again."
"From our perspective, July cuts are a go. September probably is a bit more of a wait and see and we will need to see that core inflation momentum to subside for them to be able to ease further in the fourth quarter of the year."
DOUG PORTER, CHIEF ECONOMIST AT BMO CAPITAL MARKETS
"I would say that this is back on track for underlying disinflation after a bit of a detour in May. It's not quite as good as the headline would suggest. The seasonally adjusted move on the major cores was still a little bit above two-tenths of a percent in the month. So it's not airtight but I would say it's good enough. …I think combined with the weak employment number and the relatively soft business outlook survey this likely sets the stage for a rate cut next week."
Reporting by Fergal Smith and Anna Mehler Paperny; editing by Fergal Smith, Jason Neely and Chizu Nomiyama
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