Next week, the Bank of Canada will decide whether to lower interest rates or wait for (at least) another seven weeks.
The evidence that rates should fall is mounting.
Consider three of the Bank of Canada’s own core measures of inflation. These strip out volatile items, so they provide a decent indicator of where overall inflation is headed. As I illustrate below, all three show price rises below the Bank’s 2 percent inflation target in recent months.
Graphic credit: Janice Nelson.
At its last interest rate decision, it said that before lowering rates, it “will be looking for evidence that this downward momentum is sustained.” It now has that evidence.
Falling inflation is undoubtedly good news. And if rates fall, all the better. Despite this, the broader Canadian public is unlikely to feel much better. Many might question, or even outright reject, the data itself.
And they’ll have a point.
Not because the data is manipulated, to be clear. (I’m not peddling a conspiracy theory here.) But because our experience of inflation is worse than what the headline inflation statistics suggest.
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