Canada's Inflation Reaches 4.4% In April, More Rate Hikes To Come
The annual inflation rate in Canada reached 4.4% during April, which is one of the highest values in the last 10 months. This increase in inflation will pressure Canada's central bank to raise interest rates once again after pausing it in January.
As per the analysts, the forecasted value for the annual inflation was 4.1% after a reading of 4.3% in March. In short, the market was expecting inflation to cool down by 0.2%, but the actual reading revealed a 0.1% increase.
If we look at the inflation on an MoM basis, the overall increase is 0.7% which is higher than the 0.4% forecasted value.
Rate Hikes From BoC To Continue
According to Scotiabank's analysts, the market had false hopes that the Bank of Canada would not introduce new rate hikes.
But after looking at the inflationary pressure in the country, it appears that the central bank can't afford to slow down yet.
During the last 2 meetings, the BoC decided not to introduce any rate hikes or rate cuts. This was down to assess whether the rate hikes introduced in the past are enough to control the inflation or not.
Just last year, the inflation in Canda reached its peak at 8.1% and has since come down to 4.4% in April. Although that's a lot of improvement, the central bank still can't afford to sit by and do nothing.
According to the BoC Governor, there's a chance that the inflation in Canada will remain stuck above the 2% target set by the Bank of Canada. So if this turns out to be the case, it would mean more rate hikes from the BoC.
For now, the market is now predicting a 22% chance of another rate hike from the Bank of Canada during the June 7th meeting. Before the inflation reading, the odds of a rate hike were only 10%.
The CAD (Canadian Dollar) gained 0.3% against the USD (US Dollar) and was last seen trading near 1.3425.