CIBC: Canada's CPI Data Supports June BoC Rate Cut

Synopsis: CIBC views the latest Canadian CPI data as a green light for the Bank of Canada (BoC) to initiate rate cuts in its upcoming June meeting, citing continued easing in core inflation metrics. Key Points: Headline CPI Alignment: Today’s CPI figures aligned with consensus at a 0.5% monthly increase, leading to an annual rate of 2.7%, a decrease from the previous 2.9%. Core Inflation Softness: Core inflation measures such as CPI-Trim and CPI-Median showed year-over-year decreases to 2.9% and 2.6% respectively, indicating underlying softness in price pressures. Monthly Trends and Impacts: The monthly data remained moderate, with CPI excluding food and energy only rising by 0.1% on a seasonally adjusted basis. Mortgage interest costs significantly drove the headline CPI year-over-year increase, while reductions in telephone services and internet costs countered these effects. BoC’s Stance: Following the April rate decision, BoC Governor noted the need for persistent subdued inflation readings before considering rate cuts. The trend of tame inflation over the last four months aligns with CIBC's prediction of a rate cut in June. Conclusion: The recent CPI data confirms CIBC's expectation for a BoC rate cut next month, marking a pivotal shift in Canadian monetary policy aimed at addressing softening inflation while supporting economic growth.