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Inflation Watch: Focus On June CPI After Unexpected Acceleration In May

CANADA
  • After the BOC's June interest-rate cut, markets are pricing the odds of another cut in July below 50%. The BoC said its July rate decision would focus on: evolution of excess demand, inflation expectations, wage growth, and corporate pricing power.
  • Headline inflation rose faster than expected in May, although it remained within BoC target bands; the Bank projected inflation to be close to +3% in H1'24 and come down to 2.5% in H2 this year. Core measures increased for the first time this year in May.
  • Governor Macklem says economy has moved into excess supply and has room to grow while moving back to the inflation target. Q1 GDP was below the BoC's forecast of +2.8%, instead rising +1.7%. He's also said bumps can be expected but he's increasingly confident inflation is moving back to target.
  • The Bank says consumer and business near-term inflation expectations and corporate pricing behaviour moderated over Q1 2024, but remain elevated. The BoC will update Q2 expectation in the July MPR.
  • Unemployment has been increasing and reached +6.2% in May, and the BoC . Macklem has said that a broad range of indicators suggest the wage growth is easing, but would like to see further progress; BoC preferred measures that control for productivity have come below +4% at a 6M annualized basis.
  • Global oil prices that moderated in recent months have started to rise again as supply is expected to decrease from geopolitical risks.
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