| Bottom Line
Governor Macklem’s prepared opening statement at today’s press conference was more dovish on inflation than in prior months. “We are seeing what we need to see, but we need to see it for longer to be confident that progress toward price stability will be sustained,” Macklem said in the prepared text. If things go according to today’s MPR forecasts, policymakers are likely to begin cutting the overnight rate in June.
Still, Macklem called further declines in core inflation “very recent,” adding that the bank wants to “be assured this is not just a temporary dip.”
“While inflation is still too high and risks remain, CPI and core inflation have eased further in recent months,” officials said in the policy statement.
The next decision date is June 5, when overnight swaps traders pared their bets to about a 50-50 chance of a 25 basis point cut at that meeting, down from over two-thirds before today’s data release. A July rate cut is fully priced in.
We will know more this coming Tuesday when the March CPI data (along with the federal budget) are released. April CPI will be posted on May 21. As the chart below shows, inflation data in Canada is rapidly approaching the 2% target, well ahead of the US, although set backs can’t be ruled out. For example, gasoline prices have risen since early February. However, the proportion of CPI sectors showing less than 1% gains is rising as those showing more than 3% increases are falling fast. |
