How can the latest inflation numbers affect the Bank of Canada’s next rate decisions?

As Canada showed higher-than-expected inflation last month, some experts believe the return to interest rate increases by the central bank may be still possible.

According to Statistics Canada, inflation saw an annual increase of 4.4% in April outpacing the 4.1% hike forecasted by economists polled by Bloomberg, and exceeding a gain of 4.3% reported in March.

Although the Bank of Canada has kept its key lending rate at 4.5% for the last few rate meetings, CIBC economist Avery Shenfeld believes that the recent data could mean a return to interest rate increases at the Bank’s next meeting on June 7.

“The risk of a return to rate increases can’t be ruled out, as following a no-change policy now depends strongly on a slowdown in the labour market,” – he explained.

Statistics Canada’s next labour report will be released on June 9.

At the same time, Devlin Capital founder Ed Devlin, expects the BoC not to change the overnight rate for the next few decisions. In his opinion, further rate hikes are quite unlikely right now.

“I find it highly improbable they’ll change their path,” – he added.

Devlin says certain market watchers are rushing with their rate-cut forecasts, although the pace of inflation growth is slowing down significantly from the previous year.

“We can see a really good tendency, but I do think we still have a lot of work to do,” – he said. “Those who are predicting changes in policy in the nearest future are probably rushing with it.”