Canada’s headline inflation likely to have slowed slightly in May

Canadian consumer price inflation is expected to have slowed a bit in May. According to a TD Economics research report, the May CPI is likely to have moderated slightly to 1.5 percent year-on-year, with lower gasoline prices driving a further deceleration in energy prices.

Food prices are expected to rise further out of deflation though lingering competitiveness pressures are expected to restrict the rebound. Core metrics is expected to stabilize and eventually move higher in months ahead, but another drop in May cannot be excluded given the long lagged impacts of material slack. If the latter case is realised, it should be faded given the Bank of Canada’s recent comments and change in tone, added TD Economics.