After Statistics Canada reported on Tuesday morning that Canada’s annual rate of core inflation eased for a fourth consecutive month in April, economists say all signs point to the Bank of Canada cutting interest rates this summer. 

Here’s what Canadian economists say the latest consumer price index (CPI) data signals.

BMO Capital Markets

“These are very good numbers for Canadians and for the Bank of Canada,” Sal Guatieri, director and senior economist at BMO Capital Markets, told BNN Bloomberg during an interview on Tuesday.

“We saw the headline rate come down but also the two key core measures of inflation that the Bank of Canada follows quite closely. The median and trim measure both came down quite nicely. The trim now is below three per cent so that’s fairly important,” he explained. 

Guatieri added that, aside from the upward pressure on housing costs, “there’s really not a whole lot of inflation now.” 

“The CPI, excluding shelter — so big increases in rent and mortgage interest costs — that measure is only up 1.2 per cent in the past year,” he said. 

He mentioned that the data clears the way for the Bank of Canada to cut interest rates, but said a June cut is not guaranteed. 

“Whether it meets the bank’s criteria of evidence of a sustained decline in core inflation, it’s a close call,” he told BNN Bloomberg. “They might wait an extra month and move in July but this report certainly moves the needle perhaps in favour of a June rate cut.”

RSM Canada

Tu Nguyen, economist with national tax, assurance and consultancy firm RSM Canada, says a June rate cut in light of Tuesday’s data is “a no brainer.” 

“All data points in the report point to a clear rate cut,” she said in an emailed statement to BNN Bloomberg.

Nguyen mentioned that the CPI reading is the “last major data point” before the Bank of Canada’s interest rate decision on June 5, explaining that headline inflation fell to the lowest it has been since early 2021, “a year before the first rate hike of this cycle.” 

“As the economy dragged along and headline inflation fell in the one to three per cent range for the fourth month in a row, there is really no reason for the Bank of Canada to wait until July,” she said in the statement. “The Bank of Canada had wanted to see evidence of sustained disinflation, and April’s data sent a loud and clear message that disinflation is here to stay.”

Nguyen added that despite spring and summer potentially ushering in higher gasoline prices, consumers can “breathe a sigh of relief that the multi-year run of high food inflation is also coming to an end, as grocery prices only rose by 1.4 per cent on an annual basis.”

A rate cut will allow the economy to begin recovering in the second half of the year, she said. “Something that can’t come soon enough for Canadian consumers and businesses.”

CIBC Capital Markets

Andrew Grantham, executive director of economics at CIBC Capital Markets, echoed the sentiment that Tuesday’s inflation data clears the way for the Bank of Canada to start cutting rates in June. 

“While headline CPI was in line with consensus expectations, rising 0.5 per cent NSA on the month for an annual rate of 2.7 per cent, we saw continued softness in most core measures of inflation including CPI-Trim and CPI median, which should be enough to bring a first interest rate cut in June,” he wrote in an emailed statement to BNN Bloomberg. 

Grantham pointed out that, on a seasonally-adjusted monthly basis, food prices fell by 0.2 per cent, “and the annual inflation rate in that category now stands below the overall pace of CPI inflation at 2.3 per cent.”

“We have previously noted that food prices also appear to have a big impact on the Bank of Canada's preferred core measures of CPI-trim and CPI-median, and so it was little surprise that both continued to show softness on a monthly basis and a deceleration in their year-over-year rates in April,” Grantham said in the statement. 

Grantham explained that the CPI-trim, which eased to 2.9 per cent from 3.2 per cent, and the CPI-median, which fell to 2.6 per cent from 2.9 per cent, both came in beneath consensus expectations. 

“Seasonally-adjusted monthly increases remained muted, at 0.1 per cent. The monthly increases in CPI-trim and median have now been in line or weaker than what would be consistent with a two per cent inflation target for four consecutive months.”

RBC

Abbey Xu, an economist with RBC, says April’s inflation readings meet economic expectations, with “underlying details” pointing to further reduction in inflationary pressures. 

In a Tuesday RBC report, Xu wrote that the Bank of Canada is “as concerned about where inflation will go in the future as where it is right now, but a persistently softer economic backdrop in Canada (declining per-capita GDP and rising unemployment rate) increases the odds that price growth will continue to slow.”

Xu added that “the case for interest rate cuts from the Bank of Canada continues to build, with today’s report in line with our own base case for a first cut in June.”