Economists expect a fall in June inflation number and likely an interest rate cut in July

Statistics Canada is set to announce inflation numbers for June Tuesday morning, and most economists expect the annual rate to have dropped, increasing the odds of a Bank of Canada interest rate cut next week.

 

A consensus of economists surveyed by Bloomberg believe the annual rate of inflation fell to 2.8 per cent in June, from 2.9 per cent in May.

 

That might be enough for the Bank of Canada to cut its key overnight lending rate for a second straight meeting.

 

On June 5, the Bank cut the overnight rate by a quarter percentage point to 4.75 per cent, the first time it had dropped below five per cent since last July, and the first time in over four years it had made any cut at all.

In May, Canada’s annual rate of inflation unexpectedly rose to 2.9 per cent, the first increase in four months.

 

Inflation peaked at 8.1 per cent in June 2022, as the Canadian economy opened back up from COVID-related restrictions.

 

The Bank raised rates 10 times between March 2022 and last summer in a bid to wrestle inflation down to its two per cent target.

 

The theory is that by making it more expensive to borrow money, consumers and businesses will spend less, driving down prices and slowing the economy.

 

 

 

 

This article was first reported by The Star