Canada’s inflation eases below expectations in February and fuels bets for rate cut in June

Canada’s inflation rate eased below expectations in February, and closely watched core inflation, stripped for the most volatile components, eased to the lowest in more than two year lows, boosting bets for a June rate cut. 

Annual headline inflation cooled to 2.8% last month, beating expectations for a 3.1% rise, and came below 2.9% increase in January.

Month on month consumer price index rose 0.3% last month, less than consensus for 0.6% rise. 

The main contributors to lower inflation were softer prices of the food purchased from stores, cellular phones and internet services

The data sparked fresh increase in bets for a first 25 basis point rate cut in June to more than 75%, from 50% before the data release, while bets for an April rate cut increased to over 28% from 18% before the CPI report was released.   

Canadian inflation data diverged from the US, its biggest trading partner, which last week saw a jump in consumer prices for February, cooling hopes of a rate cut by the Federal Reserve before June.

Economists say that with the latest CPI numbers, a rate cut in June was warranted and warned that any further delay could hurt the economy.