TORONTO (Reuters) -Canada’s annual inflation rate in May was unchanged from the previous month at 1.7% as a drop in gasoline costs continued to keep the overall index stable while prices of shelter, food and transportation also cooled, data showed on Tuesday.
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COMMENTARY
DEREK HOLT, VICE PRESIDENT OF CAPITAL MARKETS ECONOMICS, SCOTIABANK
“I still think it’s too warm to be contemplating rate cuts as soon as the July meeting but we’ll get another report (before then) and so there’s still some residual uncertainty. But the weighted-median CPI 2.2% month-over-month annualized and trimmed mean at 2.8% are off the prior month’s peak of about 4.5% but smoothed and we still haven’t licked inflation from the past challenges. As we go into the forward looking-uncertainties I think the bank still has to be very cautious.”
ANDREW KELVIN, CHIEF CANADA STRATEGIST AT TD SECURITIES
“The Bank of Canada has talked about the need for inflation to stabilize and then ultimately start moving lower in order to continue easing. Stabilization is the first step.”
“This piles a lot of pressure on to the upcoming GDP report. If we see indications that the economy slowed materially in April and/or May that will leave Bank of Canada rate cuts on the table. If we discover with the GDP report that the economy held up a little bit better than anticipated, combined with inflation at these levels, it will largely eliminate the rationale for rate cuts.”
(Reporting by Fergal Smith and Nivedita Balu; Editing by Caroline Stauffer)
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