Royal Bank of Canada’s (RBC) Abbey Xu notes that Canadian inflation eased in June, with Consumer Price Index (CPI) slowing to 2.8% year-over-year and energy prices reversing part of their earlier surge. Underlying measures such as CPI-trim and CPI-median dipped below 2%, and inflation breadth remained contained. Xu says this supports expectations that the Bank of Canada (BoC) will keep the overnight rate unchanged through 2026.

Cooling CPI backs steady BoC policy

"A pull-back in headline inflation was widely expected in June with oil prices moving lower in after surging earlier this year, but broader measures of price growth outside of energy prices also surprised on the downside."

"CPI excluding food and energy remained below target, while the Bank of Canada's preferred measures, CPI-trim and CPI-median, also dipped below 2%."

"Measures of inflation breadth were also contained, with limited evidence that earlier increases in input costs had spread significantly across the CPI basket."

"Overall, June's report was consistent with the Bank of Canada's latest assessment that underlying inflation remains close to target. Although the path for headline inflation remains highly sensitive to unpredictable global developments, contained broader price pressures and firming economic growth support our view that the Bank will keep the overnight rate unchanged through the remainder of 2026."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)