Today, all eyes were on Stats Canada as they released Canada’s inflation data for the month of April. Economists were expecting inflation to come in at 2.7%, down from the previous month’s 2.9%. And as predicted, inflation did come in at 2.7%. However, the real news was the continued slowdown in measures of core inflation, which came in under 3%.
This data comes on the heels of blowout jobs numbers released a few weeks ago, which initially caused the markets to pare back their rate cut expectations. Despite this, RBC is not only predicting a rate cut in June from the Bank of Canada, but also 200 basis points worth of rate cuts over the next year. This represents a major policy shift from that of the Federal Reserve, which is only expected to cut rates by 75 basis points.
The question now is, why would the Bank of Canada risk such a divergence from the Federal Reserve? RBC is making the argument that Canada will see major rate drops over the next year, but is not providing enough data to support this claim. The economy is still fairly strong, with unemployment at 6.1%, and there is no indication of a recession on the horizon.
While we may see rate cuts in the future, it is important to consider the economic data available and not make predictions based on speculation. The Bank of Canada will announce its decision on June 5th, and we will have an update on this channel. Stay tuned for more updates and analysis on Canada’s economic situation. Thank you for reading!
