By Robb M. Stewart
OTTAWA--Canadian inflation eased last month, resuming its decline to advance at the slowest pace in three years and leaving open the door for interest rates to be cut before summer.
The consumer-price index, a measure of goods and services prices across the economy, rose 2.7% in April from a year earlier, Statistics Canada said Tuesday. That was in line with the consensus forecast of economists and follows March's tick higher to 2.9%.
Core prices excluding volatile food and energy costs climbed a similar 2.7%, and key indicators of underlying inflation preferred by the central bank also cooled.
The biggest drivers of consumer price growth last month continued to be mortgage interest costs and rent following the central bank's aggressive monetary policy tightening into last year, as well as a further jump in prices at the pump for the month, though this was countered by decelerating food prices.
Bank of Canada policymakers have debated just how much more proof they need to be confident inflation is sustainably tracking back to their 2% target, but have said a first cut to interest rates is approaching. Expectations remain high a pivot to cutting rate will come in the next few months, though economists have been split over whether it might come at the next policy meeting in roughly two weeks.
On a month-over-month basis, inflation climbed 0.5% in April.
The inflation report and first-quarter gross domestic product figures due at the end of the month will be the last big indicators the Bank of Canada's governing council will collect deciding on rates June 5. Inflation in Canada has subsided considerably from the 40-year high of 6.8% reached in 2022 after the central bank boosted its policy interest rate to a more than two-decade high of 5%, where it has remained since last July.
In a speech to lawmakers earlier this month, central bank Gov. Tiff Macklem assured them a rate cut was getting closer but said that while progress on core inflation has become clearer there remained risks if housing prices rise faster than expected, wage growth stays high relative to productivity or global tensions escalate.
Two measures of underlying inflation the central bank closely monitors cooled notably. Weighted median and trimmed mean CPI rose an average 2.75% in April from a year earlier, the lowest level since June 2021 after 3.05% growth in March.
The Bank of Canada has projected inflation to ease below 2.5% only in the second half of this year and to return to target in 2025. A surge in hiring in April pointed to lingering resilience in the labor market that could afford the bank more time to wait for further evidence inflation will continue to wane.
Canadians continued to pay more for food last month, though growth in food bought at stores eased to 1.4% from March's 1.9% thanks largely to meat prices after a jump a year ago. Prices for food at restaurants also eased on a yearly basis, rising 4.3% following 5.1% growth in March.
Still, consumers paid 6.1% more for gasoline in April following a 4.5% increase the month before, which the data agency said reflected higher costs associated with switching to summer blends of fuel, high oil prices, and an increase in the federal government's carbon levy.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
05-21-24 0906ET
