The May 2023 inflation data from Canada is here:
RBC provide a "bottom line" forecast of what it means for the BoC:
- Although slowing, underlying inflation trends in Canada are still running well-above the BoC’s 2% target.
- Higher interest rates are cutting into household purchasing power, but spending to-date has been firm.
- Labour market conditions are also more resilient than expected in 2023 to-date.
- GDP data and the BoC’s own Q2 Business Outlook Survey later this week will be watched closely for signs that the economy is losing momentum. But absent a large downside surprise from those data releases, we continue to expect the bank to hike the overnight rate by another 25 bp in July, before stepping back the sideline for the rest of this year.
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The Bank of Canada meet on Wednesday, July 12. The Bank's Monetary Policy Report will be published concurrently with rate announcement.
The rate hike path so far from the BoC:
