The unexpected CPI climb had traders reconsidering their July rate-cut bets, but economists cautioned that the central bank will have a slew of economic data to consider over the next month
Rents continue to be an aggravation in personal finances. Statscan said rents climbed 8.9 per cent in May, year over year, up from 8.2 per centon a flare-up in services prices, weakening the case for the Bank of Canada to cut interest rates in July.
Tuesday’s report casts some doubt over the timing of interest rate cuts. Earlier this month, the Bank of Canada trimmed its benchmark lending rate to 4.75 per cent from 5 per cent – the first reduction in four years – to kickstart the process of easing monetary policy. “No bones about it, this is not what the Bank of Canada wanted to see at this point, and clearly shaves the odds of a follow-up July rate cut,” Doug Porter, chief economist at Bank of Montreal, said in a client note. “With inflation back on a bumpy path, the outlook for BoC moves is similarly bumpy.”
The housing sector is a persistent challenge. Rents rose 8.9 per cent in May, year over year, accelerating from 8.2 per cent in April. This was the largest increase that Statscan has observed since changing its rent methodology in 2019.
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