Inflation cooled to 2.7% in April as food price growth slowed

Canada’s consumer price index cooled to 2.7 per cent in April, down from 2.9 per cent in March, led by the slower growth of food prices, Statistics Canada said Tuesday.

Though food prices still rose in April, they did so at a slower pace of 1.4 per cent compared to 1.9 per cent in March, the data agency said. Price growth for food bought from restaurants also eased.

The cost of meat mostly drove the decline, but other food products that also contributed were non-alcoholic beverages; bakery and cereal products; fruit, fruit preparations and nuts; and fish, seafood and other marine products.

Meanwhile, consumers paid 6.1 per cent more for gas in April after a 4.5 per cent increase in March. Statistics Canada said that a switch to summer petrol blends, supply concerns and higher federal carbon levies contributed to the uptick.

April’s figures marked the lowest inflation rate in three years, since March 2021’s 2.2 per cent.

Positive sign for the central bank

The Bank of Canada’s preferred measures of core inflation also eased — a happy sign for the central bank, which will make its next interest rate decision on June 5.

Many economists expect that the bank will start cutting rates at that meeting.

“Today’s data should have provided the all clear on the inflation front that the Bank of Canada needed to start cutting interest rates in June,” wrote CIBC senior economist Andrew Grantham in a note.

“At the time of the April interest rate decision, the Bank of Canada governor stated that policymakers were encouraged by recent subdued inflation readings, but needed those to persist for longer before cutting interest rates.”

After four consecutive months of data that point to an easing of underlying inflation, CIBC is forecasting a first rate cut at the June meeting, Grantham wrote.

Bank of Montreal chief economist Douglas Porter said in a note that while the door is still open for a June rate cut, it will be a close call — and it will be with the U.S. Federal Reserve in mind.

“When the Bank [of Canada] does eventually move, it will be gradual with a highly patient Fed acting as a limiter on how far and how fast Canadian rates can fall,” he wrote.