By Ketki Saxena
Investing.com -- Tomorrow, Statistics Canada is scheduled to release the Canadian consumer price index (CPI) data for the month of May. This crucial economic indicator will shed light on recent inflation trends and their potential impact on future interest rate decisions.
RBC (TSX:RY) Economists Nathan Janzen and Claire Fan have published an analysis anticipating a decline in headline price growth for May, down to 3.6 per cent from April's 4.4 per cent. They attribute this drop primarily to lower energy prices during the period under review. Janzen and Fan also forecast a continued downward trend in food inflation throughout the month.
The economists do not expect last year’s significant month-over-month increases in core inflation measures to persist; however, they note that these metrics remain "sticky" at levels well above the Bank of Canada's two per cent target for overall inflation.
Despite some easing in price pressures, Janzen and Fan believe it is improbable that the central bank will hold off adjusting rates at its upcoming meeting. They write:
"We continue to see signs of cracks forming in the economic backdrop, but it’s highly unlikely that the BoC ended its pause in interest rate hikes in June for just one additional 25 basis point increase," they wrote. "It would likely take substantial downside surprises in data releases (i.e., lower inflation and / or GDP data) to prevent another hike at the next meeting in July."
Alongside the CPI data, other key economic indicators such as gross domestic product and business outlook are also slated for release this week. These reports will play a "critical" role in shaping the Bank of Canada's forthcoming interest rate decisions after it raised its primary lending rate to 4.75 per cent earlier in June.