Canadian inflation excluding food and energy costs is expected to remain above three per cent until the fourth quarter of this year, the median forecast of seven economists recently surveyed by Reuters showed, which could dash hopes of an early Bank of Canada shift to cutting interest rates.

While Canadian inflation has cooled in recent months, much of the relief has come from lower energy prices, a volatile component that the Bank of Canada tends to exclude when making policy decisions.

The readings for core, or underlying, inflation, such as the widely-tracked consumer price index excluding food and energy, are showing greater persistence than the headline rate after price pressures spread from goods into slower-moving items, such as wages and services.

“We suspect (the Bank of Canada) will only start trimming rates when they are convinced underlying inflation trends are set to move below three per cent,” Doug Porter, chief economist at BMO Capital Markets, said.

Click here to learn more.