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Canada’s April Inflation Drop Boosts Chances of June Rate Cut

Arafat Rahman

Canada’s inflation rate dropped to 2.7% in April, fueled by a decrease in food, service, and durable goods prices.

Canada’s inflation rate dropped to 2.7% in April, fueled by a decrease in food, service, and durable goods prices. This news increases the likelihood of an interest rate cut by the Bank of Canada as early as next month.

The central bank has been aiming for a sustained decrease in inflation to reach its 2% target. Economists and financial markets are increasingly confident that a rate cut is imminent.

This development is welcome news for Prime Minister Justin Trudeau’s government, which has been under fire due to rising living costs.

While food prices remain higher than previous years, the pace of increase has slowed, with grocery prices rising by 1.4% from a year ago.

Higher gasoline prices, up 6.1% year-over-year, slightly offset the overall deceleration in inflation. However, core inflation measures, which exclude volatile prices, have slowed and are now below 3%.

Economists predict that the Bank of Canada will begin lowering its policy rate in June or July, with the latest inflation figures making June increasingly likely.

TD Bank, however, suggests that the central bank may wait until July, citing the current inflation rate’s proximity to the upper limit of the Bank of Canada’s target range.

Regardless of the timing, a rate cut by the Bank of Canada would put it ahead of other major central banks. The bank’s current interest rate is at 5%, a high not seen since 2001.

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