Canada’s annualized rate of inflation slowed unexpectedly in March to 2.3 per cent, raising bets among economists that the Bank of Canada will announce a 25-basis-point rate cut at today’s meeting.
Consensus estimates had forecast a 2.7 per cent inflation reading from Statistics Canada.
Several economists said Tuesday’s data support an eighth consecutive rate cut from the BoC.
“[It] goes a long way to reassure the BoC about underlying inflation and as such reinforces our expectation of a cut at tomorrow’s meeting,” Dominique Lapointe, Manulife Investment Management’s director of macro strategy, wrote in an email on Tuesday.
“While it is not the economists’ consensus, it’s worth noting that markets have moved from pricing in 35 per cent to 45 per cent odds of a cut after this release,” he added.
“The BoC can afford to opt for an insurance cut like it did in March,” said RBC economist Abbey Xu. “The headline reading says inflation risks ahead of tariffs were subsiding.”
On the other hand, Derek Holt of Scotiabank Economics says policymakers are unlikely to be swayed by Tuesday’s data, pointing to sticky core inflation measures favoured by the Bank.
“The BoC’s preferred core readings have been rather warm throughout the past year, with last monthbeing a rare exception,” he wrote on Tuesday. “It would be laughable if the BoC seized on one report.”
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