Canada’s annual rate of inflation fell more than expected in June, Statistics Canada revealed Tuesday, increasing the odds of a Bank of Canada interest rate cut next week.
The Consumer Price Index — a broad-based measure of inflation — was 2.7 per higher in June than a year ago. That’s down from 2.9 per cent in May.
A consensus of economists surveyed by Bloomberg before the release had expected the data to show that inflation fell to 2.8 per cent in June.
Lower prices for gasoline were largely responsible for the June decline.
Tuesday’s news might be enough for the Bank of Canada to cut its key overnight lending rate for a second straight meeting, next Wednesday.
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 is a developing story.
