Uncertainty reigns as trade tensions, tax shifts cloud Bank of Canada's inflation outlook

National Post

22-06-2025

The Bank of Canada will get a fresh look at national inflation figures this week — a picture that's been particularly murky as of late amid tax changes and trade wars.
Article content
Statistics Canada is expected to publish its consumer price index for May on Tuesday.
Article content
Article content
Financial data shows the consensus among economists is that inflation ticked up to 1.8 per cent year-over-year last month.
Article content
Article content
April figures showed the annual inflation rate slowed sharply to 1.7 per cent, thanks largely to a drop in gasoline prices tied to the end of the consumer carbon price.
Article content
Article content
Benjamin Reitzes, BMO's managing director of Canadian rates and macro strategist, said he expects inflation cooled two ticks to 1.5 per cent in May. He pointed to a slowing in shelter inflation and a smaller jump in gas prices compared with the same time last year for the easing.
Article content
But it won't be just the headline number the Bank of Canada is parsing as it attempts to set its benchmark interest rate in an increasingly uncertain world.
Article content
'The reality is, they don't just look at one number. They look at a number of different inflation metrics to really try and figure out what the underlying trend is,' Reitzes said.
Article content
Bank of Canada governor Tiff Macklem called the current inflation picture 'complicated' in a speech to the St. John's Board of Trade in Newfoundland and Labrador on Wednesday.
Article content
The 'firmness' in underlying inflation lately might be early signs of the trade war with the United States impacting inflation, he said.
Article content
Article content
The central bank has so far been dogged by uncertainty tied to the tariff dispute, holding its policy rate steady at 2.75 per cent twice in a row as it waits for clarity on how the trade restrictions will impact inflation.
Article content
Article content
While the tariffs and counter-tariffs themselves are likely to drive up prices for businesses, it's not yet clear to the bank how quickly companies will pass those costs on to customers.