Inflation Dips – Pressure to Raise Prime Rate Decreases!

Canada’s annual inflation rate dipped to 1.9% in March from 2.6% in February, largely due to slower year-over-year increases in prices for food and energy, Statistics Canada said on Friday.  The Bank of Canada uses interest rates to reach its target inflation rate of 2%.  With the current inflation rate coming in at below target, the pressure to increase interest rates is off, for now.

According to Scotia Capital economist Derek Holt, “no sooner than the ink is dry on the MPR (Bank of Canada’s Monetary Policy Report) will decelerating inflation into summer return inflation to the mid-point of the BoC’s 1% to 3% operating band or lower, and that should help put the too-quick-to-react elements within consensus who have brought forward rate-hike expectations back on their heels a bit.”

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