Local Analysts On CPI

Post-CPI, the below analysts don’t call for a June hike but some will need to see a broader slowdown ahead to prevent further tightening.

• BMO: Underlying core inflation is settling in around 4%, clearly still too high for the BoC’s comfort. With policy rates on hold at 4.5%, that leaves us with slightly positive real overnight interest rates. But the 'core' question is...is that tight enough? Maybe, but we (and the BoC) will be watching how some of the more interest-sensitive sectors of the economy, and the job market, evolve in coming months.
• CIBC: Higher than expected headline inflation was a setback in getting to 2%, but we still see enough braking forces acting on economic growth, both in Canada and abroad, to turn the CPI in the right direction. But a lot of our forecast for no further BoC hikes now rests on seeing labour market slack starting to open up, and we might have to revisit that forecast should that fail to be the case in upcoming months. Today’s data remind us that rate cuts are off the table until we have gone through a few weak quarters.
• RBC: Inflation accelerated in April, but has still on balance been easing since peaking in summer 2022. Early signs that the lagged impact of higher interest rates are weighing on economic growth suggest underlying price pressures should continue to ease. The BoC is expected to stay on the sideline for the remainder of the year.
• TD: Cooler inflation for demand-sensitive services inflation, or "supercore" was the most encouraging development of the report [easing from 6.3% to 5.7% Y/Y], even though it was somewhat offset by hotter inflation for goods. This reinforces the challenge Macklem has talked about in bringing inflation all the way back to 2%. This suggests that the BoC needs to remain vigilant to inflation pressures, and may need to hike again if momentum in the domestic economy does not cool as expected.