Canada’s annual inflation rate eased to 2.7% last month and measures of core inflation also slowed, according to Statistics Canada.
These latest figures will help to increase the likelihood that the Bank of Canada will begin cutting interest rates in June.
According to Statistics Canada’s latest Consumer Price Index, the deceleration was mostly due to a slower growth in the prices of services, durable goods and food.
However, the slowdown was impeded by rising gas prices, up 6.1% last month, compared to a 4.5% increase in March.
The CPI increased 2.5% last month, excluding gasoline.
“Today’s data should have provided the all clear on the inflation front that the Bank of Canada needed to start cutting interest rates in June,” CIBC economist Andrew Grantham wrote in a research note on Tuesday.
The Bank of Canada uses the data from the CPI to help inform its decisions on interest rates.
The central bank’s next rate announcement will be on June 5.
Bank of Canada governor Tiff Macklem said last month that the bank must see sustained evidence that progress is being made, particularly on the core inflation front.
“Since then we have received two more months of data pointing to tame underlying inflation, for a total of four in a row, and because of that we continue to forecast a first rate cut at the next meeting in June,” said Grantham.
While the CPI increased 2.9% in March, core inflation slowed and continued that trend last month, with the CPI-median dropping from 2.9% in March to 2.6% in April.
“Canadians look likely to get a small dose of rate relief in the coming week,” wrote Royce Mendes, managing director and head of macro strategy for Desjardins.
“With headline inflation decelerating to 2.7 per cent in April from 2.9 per cent in March and core measures also moving in the right direction, Canadian central bankers should have the evidence they need to begin easing monetary policy,” he added.
“While the market still seems somewhat hesitant to fully commit to a rate cut in June, we see the latest inflation data as enough for the Bank of Canada to begin a gradual easing cycle at its next policy announcement.”The Bank of Canada has held its benchmark interest rate at 5% for the past year.