Market observers weigh in on latest inflation numbers

Tuesday's figures surprised many experts

Market observers weigh in on latest inflation numbers

With Canada’s annualized inflation level posting a stronger than expected performance level in April, market observers are anticipating the possibility that the Bank of Canada might begin reconsidering its policy rate strategy.

Latest figures from Statistics Canada showed that the consumer price index went up from 4.3% in March to 4.4% in April.

This was the first time that inflation accelerated since June 2022, a development that was spurred by a 28.5% year-over-year increase in mortgage interest costs, StatCan said.

Eric Theoret of Manulife Investment Management is among those airing concerns surrounding potential tightening on the central bank’s part. Theoret noted that while the BoC will almost certainly hold rates steady in its next announcement, further hikes might be needed to help rein in the inflation level down to the bank’s 2% target.

“I think it would be a neutral with the risk of a hawkish surprise,” Theoret said, as reported by BNN Bloomberg.

Avery Shenfeld of CIBC warned that the possibility of a return to rate hikes as soon as the next policy announcement on June 7 “can’t be ruled out, as staying on hold is now very dependent on seeing a slowdown in the labour market.”

The BoC’s most optimistic estimates call for inflation levels settling at around 3% by mid-2023, only reaching the target rate by the end of 2024.

Taking this into account, Ed Devlin of Devlin Capital is expecting the BoC to keep the rate frozen at 4.5% for its next few meetings.

“I find it highly improbable they’ll change policy,” Devlin said.