In April, the Consumer Price Index (CPI) increased by 2.7% year-over-year, down from 2.9% in March, the fourth consecutive decline in core inflation. The reduction in headline CPI was broad-based, led by slower growth in food prices, services, and durable goods. Gasoline prices rose faster in April, moderating the deceleration.
The range of inflationary pressures narrowed further in April, as the percentage of the Consumer Price Index (CPI) basket experiencing growth exceeding 3% decreased from 38% in March to 34%.
According to Chief Economist Dr. Sherry Cooper, April's inflation data was as expected, but underlying details suggest inflationary pressures are easing, with core measures slowing further. The Bank of Canada is concerned about both the current inflation level and its future trajectory. However, Canada’s persistently weak economic conditions, characterized by declining per-capita GDP and rising unemployment rates, suggest that price growth will likely continue to slow. This strengthens the argument for the Bank of Canada to cut interest rates.
Canada's housing market saw a decrease in sales and an increase in new listings last April, resulting in a more balanced market with a sales-to-new listings ratio of 53.4%, close to the long-term average of 55%. Inventory levels also increased to 4.2 months, the highest since the pandemic began. James Mabey, Chair of CREA's Board of Directors, commented that the spring market has brought balanced conditions, with high mortgage rates still challenging but offering buyers more bargaining power.
Given the recent inflation data and a balanced housing market, the central bank has strong justification for reducing rates at their next meeting on June 5th. However, given the Bank’s extreme caution, there is a possibility they may wait until the July meeting to act, depending on continued inflation decline.
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