Economists are forecasting inflation slowed further in May, which would be welcome progress for the Bank of Canada after it cut its key lending rate for the first time in four years.
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Tuesday’s report from Statistics Canada will offer the first inflation reading after the Bank of Canada delivered a quarter-percentage-point rate cut on June 5, bringing its benchmark rate to 4.75 per cent. Economists say the new data could set the stage for another cut in July.
BMO and TD are forecasting Canada’s annual inflation rate slowed to 2.6 and 2.5 per cent, respectively, down slightly from 2.7 per cent in April.
“It looks like it’s a fairly uneventful calm month for inflation. I would say at this stage, less news is good news,” said Douglas Porter, BMO’s chief economist.
The Bank of Canada’s decision to cut rates marked a major turning point in the central bank’s fight against inflation, which reached a peak of 8.1 per cent in mid-2022.
It was also the first G7 central bank to lower interest rates, though it was quickly followed by the European Central Bank, which cut its policy rate by a quarter-percentage point this month as well.
