Inflation Drops to 3.4% In May 2023
In May, inflation dropped like a rock to 3.4 %, the slowest rate since June 2021! This was a 22% decrease from last month at 4.4% but many experts believe that the Bank of Canada will still proceed with another increase in interest rates at its upcoming meeting in July. I personally expect the BoC won’t take their foot off the gas yet and we will see a 0.25% increase over the summer.
Why? Because other economic data points, like GDP, the Business Outlook Survey, and the jobs report are all still very strong and also influence the bank's decision-making process. Until we see inflation drop to around 2% or these other indicators start to falter, the BoC must get ahead of inflation that is still running well above the bank's target of 2%. High inflation hurts everyone while high interest rates for the short-term only affect those on variable mortgages or people renewing their mortgages now.
This was HUGE progress though and time will tell where we go from here but don’t expect interest rates to come down in the next 6 months …
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