Some economists expect inflation back in BoC target range for June - Yahoo Canada Finance

The Bloomberg consensus among economists is that inflation fell to 3 per cent in June, from 3.4 per cent in May. THE CANADIAN PRESS/Darryl Dyck

Some Bay Street economists predict headline inflation in June fell back into the Bank of Canada's target range of one to three per cent for the first time in 27 months.

The consensus among economists surveyed by Bloomberg for June's Consumer Price Index, which Statistics Canada will release Tuesday morning, is three per cent on an annualized basis.

However, some economists including those at RBC Economics and National Bank see the headline figure coming in a touch lower, at 2.9 per cent.

Either would mark a slowdown from May's year-over-year reading of 3.4 per cent.

"Much of that slowing has come from lower energy prices. Gasoline prices were running 20% below year-ago levels in June after surging last year on higher oil prices," RBC Economics said in a note last Friday.

"Mortgage interest costs have continued to surge (a record +30% year-over-year as of May.) Food prices will not outright decline but the rate of growth in grocery prices has been decelerating in recent months."

CIBC Capital Markets sees headline inflation falling to three per cent annualized, "although that may be the low water mark for a few months as base effects become less favourable," it said.

The last time inflation was within the Bank of Canada's target range was March 2021, when the year-over-year reading was 2.2 per cent.

Core measures arguably more important

While the headline number might get the most attention, core inflation measures, which can be a better gauge of underlying pressures, are arguably more important to the Bank of Canada.

"The core metrics are what really matter, and they look to slow on a yearly and 3-month annualized basis," Ben Reitzes, Canadian rates and macro strategist at BMO Capital Markets, said on Monday.

"Indeed, we have both the Trim and Median 3-month measures decelerating to below the 3.5%-to-4% range, where they've held for the prior nine months. That would be very welcome news for monetary policy officials, even if there's still a long way to go until 2%."

BMO Capital Markets forecasts headline inflation to come in at 3.1 per cent year-over-year.

Last week, the central bank hiked its benchmark rate by a quarter-point to five per cent and now believes inflation will fall back to two per cent in mid-2025, six months later than its previous forecast, as consumer spending remains strong.

"The BoC won't hesitate to hike interest rates again if that momentum in spending persists. However, interest rate headwinds continue to build," RBC Economics said.

"The household debt service ratio very likely hit a new record high in Q2, leaving households vulnerable to any deterioration in labour markets. And the unemployment rate edged higher in May and June. We continue to expect broader inflation pressures will slow enough to prevent additional interest rate hikes from the central bank."

Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.

Download the Yahoo Finance app, available for Apple and Android.

Adblock test (Why?)

https://news.google.com/rss/articles/CBMibGh0dHBzOi8vY2EuZmluYW5jZS55YWhvby5jb20vbmV3cy9zb21lLWVjb25vbWlzdHMtZXhwZWN0LWluZmxhdGlvbi1iYWNrLWJvYy10YXJnZXQtcmFuZ2UtanVuZS0xNjQ3MzA5ODEuaHRtbNIBdGh0dHBzOi8vY2EuZmluYW5jZS55YWhvby5jb20vYW1waHRtbC9uZXdzL3NvbWUtZWNvbm9taXN0cy1leHBlY3QtaW5mbGF0aW9uLWJhY2stYm9jLXRhcmdldC1yYW5nZS1qdW5lLTE2NDczMDk4MS5odG1s?oc=5

2023-07-17 16:47:30Z
2240693716