Upcoming June inflation data could open door to 2nd Bank of Canada rate cut

The Bank of Canada will get its last look at inflation figures this week before deciding whether to deliver back-to-back rate cuts on July 24.

The Bank of Canada will get one final read of inflation figures this week before it has to make its next interest rate decision, with some economists predicting a return to cooling will fuel hopes for another cut.

Statistics Canada is set to release its consumer price index (CPI) figures for June on Tuesday.

The Bank of Canada will be watching the updated inflation figures closely, particularly after a surprise uptick in price pressures the month before.

Inflation accelerated to 2.9 per cent annually in May, a move that surprised most economists who had expected CPI would continue to follow the cooling trends seen through much of 2024.

Just a few weeks before the May inflation surprise, the Bank of Canada had dropped its benchmark interest rate by a quarter of a percentage point, the first rate cut in more than four years and a significant shift in the direction of monetary policy.

Tiff Macklem, the central bank’s governor, said then that Canadians can expect to see more interest rate cuts as long as inflation continues to cool according to the Bank of Canada’s forecasts.

Avery Shenfeld, chief economist at CIBC, tells Global News that he believes May’s inflation uptick will be an outlier rather than the start of a reacceleration in price growth.

“We’re hoping that May’s significant increase was a bit of a one-off,” he says.