With March's inflation rate driven by high gasoline prices, a June rate cut seems increasingly likely
After the latest data from Statistics Canada showed a 2.9 percent increase in the annual inflation rate for March, driven primarily by higher gasoline prices, discussions about a potential interest rate cut in June have gained momentum.
Excluding gasoline, the inflation rate saw a slight decrease to 2.8 percent in March from 2.9 percent in February.
Pedro Antunes, chief economist at the Conference Board of Canada, expressed optimism in an interview with BNN Bloomberg, saying, “It’s terrific news, really.”
He views this data as a sign that the Bank of Canada might soon reduce the financial burden on households by lowering interest rates in June.
“I think this is going to be another sign and insurance that the Bank of Canada is going to start to take that burden off of households by lowering interest rates come June,” Antunes noted, acknowledging that the central bank has been cautious in its communications strategy.
He reflected on past missteps during the pandemic concerning rate predictions and emphasized the central bank's current careful approach.
Despite his expectation of a rate decrease this summer, Antunes warned that the pace of rate cuts would be gradual: “Let’s not forget on the way down I think interest rate declines are going to be way slower and certainly take more time than when they came up.”
Antunes also highlighted the uncertainty in the United States regarding rate cuts, contrasting it with the situation in Canada.
“In the US, they’re not having as much certainty around rates coming down,” he said. This uncertainty is affecting the dollar and could influence market rates in Canada if US rates remain elevated.
