When the Bank of Canada lowered its overnight rate to 4.75% from 5% on June 5, a majority of market watchers felt it signalled another drop would happen on July 24. With May’s inflation report from StatCan on Tuesday, the odds of another cut have dropped considerably. The consumer price index (CPI) rose 2.9% last month, defying economists’ expectations of a further slowdown and adding another twist in the outlook on interest rates for the rest of the year, reports Canadian Mortgage Professional, adding the increase was above a median estimate of 2.6% predicted by economists in a Bloomberg survey. Shelter costs remained up 6.4% from last year and unchanged from April, with the exception of rent costs which increased 8.9% in May, up from 8.2% in April. Food prices grew from 2.3% to 2.4%, transportation, health and personal care, recreation, education and reading all saw increases. On Monday, before the CPI increase was announced, Bank of Canada Governor Tim Macklem told a group of reporters in Winnipeg it is “reasonable” to expect additional rate cuts if the economy and inflation evolve in line with the central bank’s expectations. He said the Bank of Canada is “really trying to balance the risks” between making monetary policy more restrictive than it needs to be to tame inflation and ensuring the central bank doesn’t ease too far too quickly. “We want to see interest rates come down, too. But we don’t want to lower them too quickly and jeopardize the hard-won progress we’ve made on getting inflation down,” he said. In a note to clients on Tuesday, Katherine Judge, director and senior economist at CIBC, said the May inflation figures likely take a rate next month off the table. “Overall, with the data showing much faster price pressures than expected, this casts a lot of doubt on the possibility of a July cut,” she wrote. Stephen Brown, deputy chief North America economist with Capital Economics, told Global News some aspects of the CPI tend to be “volatile” adding he doesn’t expect large increases in travel costs to be repeated in June. Brown also believes food costs won’t be sustained in the months to come. “They’re all suggesting that food inflation in the CPI should remain well behaved,” he said. “So I don’t really think this is anything to be too concerned about just yet.” A factor not in play when the May CPI was calculated were lower mortgage costs brought on by the bank’s reduction earlier this month, however the general feeling among economists is there will be little effect felt from the .25% decrease. Even though overall price hikes have slowed from the highs in the last four years, be it mortgage costs or rising rents, Canadians are still feeling the pinch when it comes to housing, Dawn Desjardins, chief economist of Deloitte Canada, told Global News. “These are persistent pressures within the economy and they are pressures that impact Canadians,” she said. Desjardins expects the bank will hold its rate on July 24, but doesn’t completely rule out a second consecutive interest rate cut, saying the bank is likely to be “methodical” and “deliberate” about the pace of easing. The inflation report for June, as well as jobs and GDP data, will be released before the bank’s rate announcement, which may or not affect the decision, says Desjardins. Regardless, Brown says the trend for the bank is clear, rates are likely heading down. “Another pause would not significantly affect the calculus for the central bank nor, by extension, Canadian households keen to see borrowing costs come down,” he says. Despite May’s CPI being between the bank’s target range of 1% and 3%, Reuters said Tuesday money markets have trimmed their bets and now see a 45% chance of a rate cut in July, down from more than 70% seen as recently as Monday. .This is what the Western Standard is up againstThe Trudeau government is funding lies and propaganda by directly subsidizing the mainstream media. They do this to entrench the powerful Eastern, woke and corrupt interests that dominate the political, social and economic institutions in Canada. Federal authorities are constantly trying to censor us and stop us from publishing the stories that they don’t want you to read. Ottawa may weaponize our taxes and police against us, but we’ve got a powerful ally on our side.You. Free men, and free women. We need you to stand with us and become a member of the Western Standard. Here’s what you will get for your membership:Unlimited access to all articles from the Western Standard, Alberta Report, West Coast Standard, and Saskatchewan Standard, with no paywall. Our daily newsletter delivered to your inbox. .Access to exclusive Member-only WS events.Keep the West’s leading independent media voice strong and free.If you can, please support us with a monthly or annual membership. It takes just a moment to set up, and you will be making a big impact on keeping one the last independent media outlets in Canada free from Ottawa’s corrupting influence.
When the Bank of Canada lowered its overnight rate to 4.75% from 5% on June 5, a majority of market watchers felt it signalled another drop would happen on July 24. With May’s inflation report from StatCan on Tuesday, the odds of another cut have dropped considerably. The consumer price index (CPI) rose 2.9% last month, defying economists’ expectations of a further slowdown and adding another twist in the outlook on interest rates for the rest of the year, reports Canadian Mortgage Professional, adding the increase was above a median estimate of 2.6% predicted by economists in a Bloomberg survey. Shelter costs remained up 6.4% from last year and unchanged from April, with the exception of rent costs which increased 8.9% in May, up from 8.2% in April. Food prices grew from 2.3% to 2.4%, transportation, health and personal care, recreation, education and reading all saw increases. On Monday, before the CPI increase was announced, Bank of Canada Governor Tim Macklem told a group of reporters in Winnipeg it is “reasonable” to expect additional rate cuts if the economy and inflation evolve in line with the central bank’s expectations. He said the Bank of Canada is “really trying to balance the risks” between making monetary policy more restrictive than it needs to be to tame inflation and ensuring the central bank doesn’t ease too far too quickly. “We want to see interest rates come down, too. But we don’t want to lower them too quickly and jeopardize the hard-won progress we’ve made on getting inflation down,” he said. In a note to clients on Tuesday, Katherine Judge, director and senior economist at CIBC, said the May inflation figures likely take a rate next month off the table. “Overall, with the data showing much faster price pressures than expected, this casts a lot of doubt on the possibility of a July cut,” she wrote. Stephen Brown, deputy chief North America economist with Capital Economics, told Global News some aspects of the CPI tend to be “volatile” adding he doesn’t expect large increases in travel costs to be repeated in June. Brown also believes food costs won’t be sustained in the months to come. “They’re all suggesting that food inflation in the CPI should remain well behaved,” he said. “So I don’t really think this is anything to be too concerned about just yet.” A factor not in play when the May CPI was calculated were lower mortgage costs brought on by the bank’s reduction earlier this month, however the general feeling among economists is there will be little effect felt from the .25% decrease. Even though overall price hikes have slowed from the highs in the last four years, be it mortgage costs or rising rents, Canadians are still feeling the pinch when it comes to housing, Dawn Desjardins, chief economist of Deloitte Canada, told Global News. “These are persistent pressures within the economy and they are pressures that impact Canadians,” she said. Desjardins expects the bank will hold its rate on July 24, but doesn’t completely rule out a second consecutive interest rate cut, saying the bank is likely to be “methodical” and “deliberate” about the pace of easing. The inflation report for June, as well as jobs and GDP data, will be released before the bank’s rate announcement, which may or not affect the decision, says Desjardins. Regardless, Brown says the trend for the bank is clear, rates are likely heading down. “Another pause would not significantly affect the calculus for the central bank nor, by extension, Canadian households keen to see borrowing costs come down,” he says. Despite May’s CPI being between the bank’s target range of 1% and 3%, Reuters said Tuesday money markets have trimmed their bets and now see a 45% chance of a rate cut in July, down from more than 70% seen as recently as Monday. .This is what the Western Standard is up againstThe Trudeau government is funding lies and propaganda by directly subsidizing the mainstream media. They do this to entrench the powerful Eastern, woke and corrupt interests that dominate the political, social and economic institutions in Canada. Federal authorities are constantly trying to censor us and stop us from publishing the stories that they don’t want you to read. Ottawa may weaponize our taxes and police against us, but we’ve got a powerful ally on our side.You. Free men, and free women. We need you to stand with us and become a member of the Western Standard. Here’s what you will get for your membership:Unlimited access to all articles from the Western Standard, Alberta Report, West Coast Standard, and Saskatchewan Standard, with no paywall. Our daily newsletter delivered to your inbox. .Access to exclusive Member-only WS events.Keep the West’s leading independent media voice strong and free.If you can, please support us with a monthly or annual membership. It takes just a moment to set up, and you will be making a big impact on keeping one the last independent media outlets in Canada free from Ottawa’s corrupting influence.
