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James Knightley, Senior Economist at ING, explained that they see the Bank of Canada rising rates in July as today’s data showed average core inflation up in April to the bank’s 2% target.

Key Quotes:

“Headline inflation for April came in at 2.2% year-on-year, below expectations and last month’s reading, following a slowdown in travel services and gasoline prices. However, two out of three core inflation measures increased, leaving the average rate at the Bank of Canada’s 2% inflation target.”

Recent data has also shown a build-up in wage pressures, which is encouraging after the latest mixed bag of employment data. These figures, combined with other positive releases such as retail sales (which increased for the third consecutive month in March), mean that the data-dependent BoC will not hesitate to hike rates once the Nafta coast is clear.”

“Given that US mid-term elections are fast approaching and the high risk of Republicans losing control of Congress, Trump will not want to delay a Nafta signing.”

“We see the Bank of Canada continuing with its monetary policy tightening in the second half of the year, and expect a first hike in July.”