Inflation reading won't 'move the needle' for Bank of Canada, says economist
Canada’s inflation rate slowed to 1.7 per cent in July, but economists are still uncertain about the future of interest rates. Statistics Canada reported a 0.2 percentage point decrease in the consumer price index (CPI) from June, largely due to a drop in gasoline prices.
Economists have varying opinions on the latest inflation numbers. Andrew Grantham from CIBC Capital Markets believes that the recent data paves the way for a potential interest rate cut in September. He sees this as a positive step towards a 25-basis-point reduction at the upcoming Bank of Canada meeting.
On the other hand, Claire Fan from Royal Bank of Canada views the easing inflation as a welcome development for the Bank of Canada. However, she deems an interest rate cut in September unlikely due to other economic factors and relatively high underlying inflation numbers.
Michael Davenport of Oxford Economics Ltd. argues that while inflation has decreased from June, it is still too high for the Bank of Canada to consider a rate cut in the near future. He anticipates that the central bank will maintain the policy rate steady at 2.75 per cent on September 17, citing concerns about trade policy uncertainty and lingering inflation pressures.
Bradley Saunders from Capital Economics Ltd. believes that the soft inflation data opens up the possibility of an interest rate cut in September, pending favorable economic indicators. He cautions that policymakers will likely monitor GDP and labor market data before committing to a rate cut.
Overall, the future of interest rates in Canada remains uncertain, with economists closely monitoring economic data for clues on the Bank of Canada’s next move. The impact of trade policies and counter tariffs on inflation is also a key factor to consider in the decision-making process.
