OTTAWA — Inflation in Canada fell to 2.7 percent in April, its lowest level in several years, the government statistical agency said Tuesday, increasing the prospects of an interest rate cut soon.
The figure was down from 2.9 percent in March and marks the fourth month in a row that the Consumer Price Index has come in below the upper end of the Bank of Canada’s 1.0-3.0 percent target range.
This “persistently softer economic backdrop,” which has also seen rising unemployment, further builds the case for the central bank to start cutting interest rates, Royal Bank of Canada analyst Abbey Xu said in a research note.
READ: Canada central bank holds key lending rate at 5%
Royce Mendes of Desjardins said he expects the bank “to begin a gradual easing cycle at its next policy announcement” on June 5.
April inflation was led by food prices, services, and durable goods, and moderated by a jump in gasoline prices, according to Statistics Canada.
Meat contributed the most to slower price growth. Prices of bakery and cereal products increased slightly, while the costs of fruit and nuts, as well as fish and seafood, fell.
Consumers paid 6.1 percent more at the pump year over year in the month, due to a switch to more expensive summer blends, higher oil prices, and an increase in the federal carbon levy.
Mortgage interest costs, rents, and car insurance premiums were also up in the month, while prices for telephone and internet services and computing equipment fell.