Is another rate increase on the way?
The Bank of Canada will continue to review the possibility of another interest rate hike after new data revealed the consumer price index (CPI) increased to 3.3% year over year in July.
The Canadian central bank’s preferred “core” measures showed some improvements on an average three-month annualized rate basis. CPI-trim and median measures average at a lower 3.5% in July. Trim services prices ex-shelter, or “super core”, eased to 4.2% on that same annualized basis.
The BoC had previously projected inflation to remain between 1% and 3% from the middle of 2023 for a year, and creep down to 2% by mid-2025.
"Given the Bank of Canada has given itself a long time to reach the 2% inflation target, this likely won't be enough to bring central bankers off of the sidelines," Tiago Figueiredo, an economist at Desjardins Group, told Reuters.
"We see it as close to a 50-50 proposition whether they hike or not, although we tend to lean towards a hold given the softening job market," added Jules Boudreau, a senior economist at Mackenzie Investments.
According to national statistics agency Statistics Canada, July saw 6,400 jobs lost and an increase of the unemployment rate to 5.5%. Excluding food and energy, the price of goods rose by 2.3%, while the price of services increased by 4.3%. Grocery prices rose by 8.5%.
The Bank of Canada has increased its benchmark interest rate 10 times since last March, from a low of 0.25% to its current level of 5%. That marks its highest point for 22 years, a response to inflation that had surged dramatically to hit a 39-year peak last June.
