As the inflation rate drops to a 3-year low in April, we can expect interest rate cuts for the Bank of Canada in June, economists say. The annual interest rate dropped from 2.7 % in April to 2.9 % in March. Economists also indicate that the first cut in interest of the BOC’s tightening cycle will come in June.
Canada’s Consumer Price Index (CPI) rose to 0.5 %, close below the expected rate of 0.6 % from March to April (month-over-month). It indicates that the BoC has space to move such that we can expect a rate cut in the month of June.
Read More | YouTube Shorts vs. TikTok: Battle of Short-Form Video Platforms Intensifies in US
What the economists have to say on rate cuts
Andrew Gratham, executive director of economics at CIBC, has said that the data provided by BoC “provided the all the clear” indications that there will be a first cut in the interest rates by the bank.
In a note addressing the clients, he wrote, “At the time of the April interest rate decision, the Bank of Canada Governor stated that policymakers were encouraged by recent subdued inflation readings but needed those to persist for longer before cutting interest rates.”
“Since then, we have received two more months of data pointing to tame underlying inflation, for a total of four in a row, and because of that, we continue to forecast a first rate cut at the next meeting in June.”
Read More | India to become $4 trillion economy in FY25: Sanjeev Sanyal
“A Rate Cut in June is not possible”
According to a senior economist at the Canadian Chamber of Commerce, data released on Tuesday will give BoC enough confidence that the country’s inflation rate is stable. “A rate cut in June is not just possible; it’s becoming the main consideration,” he said.
“As the economy dragged along and headline inflation fell in the 1-3 per cent range for the fourth month in a row, there is really no reason for the Bank of Canada to wait until July”, says Tu Nguyen, Economist at RSM Canada.
BMO Capital Markets Chief Economist highlights that all core inflation measures are at 3% presently, which indicates a favourable report and most certainly interest rate cuts. The BoC’s potential interest rate cut could impact worldwide economic strategies and policy frameworks.
About Author
This article is written by Janvi Singh, a seasoned content writer and aspiring business journalist. She holds a postgraduate degree in media studies, and although she has gained experience in writing for various digital platforms, she has a keen interest in writing business news.
