Scotiabank analysts believe sticky inflation to prevent Bank of Canada from further rate cuts

As analysts of Scotiabank have warned, persistent price pressures in Canada will not allow the country's central bank to continue reducing borrowing costs in the near future. At the same time, experts emphasize that the persistence of the increased rate of price growth was observed even before the manifestation of the influence exerted by the US tariffs on supply chains.

In April, headline inflation in Canada almost matched expectations, slowing to 1.7% from 2.3% in March. However, this was mainly due to the removal of the consumer carbon dioxide emissions tax.

Meanwhile, the Bank of Canada's preferred measure of core inflation is well above target. The trimmed mean CPI rose 4.6% in April year-on-year, while the weighted median rose 4.5%. As a result, the year-to-date figures rose to 3.1% and 3.2% respectively, exceeding the central bank's forecasts. 

Markets reacted by reducing expectations of a rate cut by the regulator on June 4. According to Investing, estimates for the rate cut fell from 17 basis points before the CPI release to 8 basis points afterward. Scotiabank experts highlighted that the bar for further easing is now "very high" against the backdrop of increasing risks of accelerating inflation due to tariffs.