The headline annual inflation number for April was 2.7%, which was broadly in line with expectations and marked the fourth consecutive month of easing. The better news was that key core inflation measures all came in below 3%. Each measure rose by 0.1% month-over-month, and their three-month trends were below 2% on an annual basis, supporting the view that inflation is slowing. The annual rate for CPI-trim fell to 2.9% from 3.2%, while CPI-median dropped to 2.6% from 2.9%, and the inflation rate excluding food and energy fell to 2.7% from 2.9%. The Bank of Canada’s former core inflation metric, CPIX (which excludes eight of the most volatile components of the CPI, including mortgage interest costs), remained unchanged from the previous month at 1.6% year-over-year. These annual core inflation measures are at levels last seen in mid-2021.
Some price components did move up. The biggest changes were a 7.9% month-over-month jump in gasoline prices and a 7% rise in internet fees. Shelter costs also continued to climb, with mortgage interest up 1.2% and rent up 0.5% month-over-month. Conversely, food, travel tours, airfare, and furniture costs were all lower.
This is the fourth benign CPI report this year, indicating that restrictive monetary policy is working. This latest data provides the Bank with the justification needed for a rate cut in June. However, consumers will still face constrained spending due to higher mortgage and rent payments, even if rates are cut. It’s a close call, but the BAX contract (which analyzes Canadian interest rate expectations) suggests a 53% likelihood of a 25 basis point rate cut at the next policy meeting.
Housing Affordability Watch
CMI monitors the latest developments and offers insights on solutions to Canada’s housing affordability crisis
Rising rents are a critical factor in the Canadian housing crisis, affecting affordability, supply and demand dynamics, and the well-being of vulnerable populations. Addressing this issue requires coordinated efforts from policymakers, developers, and community organizations. However, as the national rental market faces low vacancy rates, there is no quick solution on the horizon. Read our complete analysis in the latest Housing Affordability Watch: No Immediate Relief in Sight for Soaring Rents
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