The odds of an interest rate cut by the Bank of Canada grew stronger Tuesday morning with the release of the latest inflation numbers.According to Statistics Canada, June inflation numbers cooled more than expected, to 2.7%, raising the prospects for an interest rate cut when the Bank of Canada meets again on July 24.Analysts had expected the Consumer Price Index (CPI) to drop to 2.8% from 2.9% in May. The lower number means the economy is cooling off faster than expected and raising the prospect of a recession.According to CIBC economist Katherine Judge, “the prior month's upside surprise in inflation was just a blip in a broader trend of disinflation as demand in the economy remains under pressure.".Economists attributed the drop to lower year-over-year gasoline prices. Excluding fuel, consumer prices actually rose 2.8%.According to Statistics Canada, prices for durable goods — cars, home appliances, firearms and furniture — actually fell 1.8% year-over-year.Meanwhile, grocery prices were up 2.1% compared to 1.5% in May. The numbers mean that the Bank of Canada is almost certain to cut at least a quarter point, analysts said.That’s because business bankruptcies have been rising, auto loans have turned delinquent and people are increasingly defaulting on credit card debt.A Bank of Canada survey on Monday showed that business are not inclined to invest in expanding their operations or investing in new machinery and equipment over the next year."Today's CPI report, taken with the weak (second quarter) Business Outlook Survey, the ongoing march higher in the jobless rate, and increased economic slack are expected to provide policymakers with enough confidence... to ease policy rates 25 bps to 4.5% on July 24," wrote BMO Capital Markets managing directorBenjamin Reitzes.
The odds of an interest rate cut by the Bank of Canada grew stronger Tuesday morning with the release of the latest inflation numbers.According to Statistics Canada, June inflation numbers cooled more than expected, to 2.7%, raising the prospects for an interest rate cut when the Bank of Canada meets again on July 24.Analysts had expected the Consumer Price Index (CPI) to drop to 2.8% from 2.9% in May. The lower number means the economy is cooling off faster than expected and raising the prospect of a recession.According to CIBC economist Katherine Judge, “the prior month's upside surprise in inflation was just a blip in a broader trend of disinflation as demand in the economy remains under pressure.".Economists attributed the drop to lower year-over-year gasoline prices. Excluding fuel, consumer prices actually rose 2.8%.According to Statistics Canada, prices for durable goods — cars, home appliances, firearms and furniture — actually fell 1.8% year-over-year.Meanwhile, grocery prices were up 2.1% compared to 1.5% in May. The numbers mean that the Bank of Canada is almost certain to cut at least a quarter point, analysts said.That’s because business bankruptcies have been rising, auto loans have turned delinquent and people are increasingly defaulting on credit card debt.A Bank of Canada survey on Monday showed that business are not inclined to invest in expanding their operations or investing in new machinery and equipment over the next year."Today's CPI report, taken with the weak (second quarter) Business Outlook Survey, the ongoing march higher in the jobless rate, and increased economic slack are expected to provide policymakers with enough confidence... to ease policy rates 25 bps to 4.5% on July 24," wrote BMO Capital Markets managing directorBenjamin Reitzes.
