May 17, 2023
Statistics Canada’s consumer price index report set to be released Tuesday is expected to show inflation slowed once again in April.
A combination of easing global pressures and higher interest rates have brought inflation down significantly since last summer in both Canada and the U.S. Here in Canada, the inflation rate has been nearly halved, slowing from a peak of 8.1 per cent to 4.3 per cent in March.
TD is forecasting the annual inflation rate was 4.0 per cent in April. The commercial bank also expects food inflation, which has strained people’s finances considerably, eased last month.
The Bank of Canada is forecasting inflation will fall to about 3 per cent in the coming months. The path to 2-per-cent inflation is expected to be much longer, however, as the central bank expects inflation to return to target by the end of 2024.
Its key interest rate sits at 4.5 per cent – the highest it’s been since 2007. Higher borrowing costs caused by the rate hikes are expected to nearly halt economic growth this year.
But the Bank of Canada has said it won’t be satisfied until inflation comes back to its 2-per-cent target. To gauge what the path to 2-per-cent inflation will look like, the central bank is keeping a close eye on a specific part of the economy: the labour market.
The performance of the Canadian labour market has been somewhat of a mystery to economists. Forecasters have been surprised time and again by stronger-than-expected job gains, while the unemployment rate holds steady at 5 per cent.
