‘Certainly very modest core inflation continues to rumble in the background as a pretty strong reason for the bank not to rush the proceedings. That story was just pounded home today.’ – Doug Porter, Bank of Montreal
Canadian consumer prices rose less than expected last month, moving away from the Bank of Canada’s inflationary target of 2%. Statistics Canada reported on Friday that its CPI advanced 0.1% month-over-month in May, following the prior month’s increase of 0.4% and falling behind analysts’ expectations for a 0.2% rise. On an annual basis, consumer inflation climbed 1.3%, the lowest since November 2016, in May, down from the preceding month’s gain of 1.6%, whereas analysts anticipated an increase of 1.5%. In the meantime, core consumer prices climbed 0.1% in May, up from the previous month’s 0.0%. Analysts suggested that due to weak inflation data the Central bank would likely leave it policy and interest rates unchanged at its next meeting in July. Nevertheless, a rate hike by the end of this year remained on the table. The Bank has been holding rates at a record low of 0.50% since 2015, when it was forced to lower rates due to the sharp oil price fall. Food prices dropped 0.1% in May, marking the eighth straight monthly decline, whereas gasoline prices rose 6.8%, following the prior month’s climb of 15.9%.
