"On the other hand, inflation is leveling off, but it's leveling off at levels that the bank would not be comfortable with." "Most of that was, in fact, transitory," Gordon said. Stephen Gordon, an economics professor at Laval University, says the large price increases caused by the Russian invasion of Ukraine have faded from the calculation of the year-over-year inflation rate. While the central bank is still focused on restoring price stability, Canada has made significant progress on the inflation front compared to last summer when inflation hit a peak of 8.1 per cent. "Absent a large downside surprise from those data releases, we continue to expect the bank to hike the overnight rate by another 25 basis points in July, before stepping back the sideline for the rest of this year," wrote RBC economist Claire Fan in a client note. The central bank will have a few more data releases to consider before its next rate decision, including a jobs report and a reading on real gross domestic product. The decline in overall inflation is likely welcome news for the Bank of Canada, which is gearing up for its next interest rate decision on July 12 after raising its key rate by a quarter-percentage point to 4.75 per cent earlier this month.īut forecasters are still leaning toward another rate hike, noting underlying price pressures - particularly on the services side - are still high. Grocery prices were up nine per cent on an annual basis, showing little improvement from April. However, the long-awaited decline in food inflation has yet to come through in Canada. That's the lowest it’s been since June 2021. Statistics Canada reported Tuesday the annual inflation rate fell to 3.4 per cent in May, largely due to lower gasoline prices compared to a year ago. OTTAWA - Canada's inflation rate tumbled in May as price shocks caused by the Russian invasion of Ukraine have been mostly absorbed, but economists are still expecting the Bank of Canada to move ahead with another rate hike next month.
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