Inflation stays stubborn but rate cuts still in forecasts

The slight increase to inflation reported yesterday is not outside the range that could jeopardize an anticipated interest rate cut in June.

Statistics Canada reported yesterday that the Consumer Price Index rose to 2.9% in March — up from 2.8% in February. Gas prices were the biggest reason for the rise. Without those fuel costs, March’s inflation actually slowed from the previous month.

“Many inflation indicators are trending in the right direction and interest rate cuts are still on the table for the Bank of Canada’s interest rate announcement in June,” the Conference Board of Canada stated, adding that getting to 2% inflation target could take awhile. Many employers are forecasting wage growth and consumers still see prices rising in the months ahead.

“While there is still one more CPI release to come before the Bank’s next policy decision, (yesterday’s) data keeps us on track to see a first rate cut at that June meeting,” CIBC Executive Director of Economics Andrew Grantham said.