Canada's Inflation Cools to Three-Year Low Boosting June Rate Cut Bets

• Canada's annual inflation rate slowed to a three-year low of 2.7% in April, and core measures continued to ease, data showed on Tuesday, prompting money markets to see an increased chance of an interest rate cut in June.
• Analysts polled by Reuters had forecast inflation to cool to 2.7% from 2.9% in March. Month on month, the consumer price index rose 0.5% in April, also less than a forecast of a 0.6% gain.
• The April inflation figures are critical for Bank of Canada Governor Tiff Macklem, who has repeatedly said he would like to see more evidence that prices are easing before deciding on when to start cutting rates.
• "Canadian central bankers should have the evidence they need to begin easing monetary policy," Royce Mendes, head of macro strategy for Desjardins Group, wrote in a note, adding that he was expecting the first rate cut to happen in June.
• After the data's release, money markets increased their bets for a rate cut on June 5 to almost 55% from 39% earlier.
• The BoC has cranked up interest rates by 475 basis points from March 2022 until last July and since then has held them steady at a near 23-year high of 5.0%. This has helped ease the rate of increase in prices from a high of 8.1% seen two years ago, but the final lap to reach the BoC's 2.0% inflation target has been difficult, especially due to shelter costs, wage pressures, and food prices.

(Source: Reuters)