MNI BRIEF: BOC Says Sentiment Remains Low; Trend CPI Above 2%

Bank of Canada Governor Tiff Macklem told reporters Wednesday the more real-time sentiment indicators officials have focused on through the shifting U.S. trade dispute remain near a low point and regular core inflation measures appear to be overstating price gains, signals in line with his view he may cut rates again later this year. 

The economy has shown some resilience as Donald Trump imposed tariffs but sentiment fell off as trade tensions escalated and "are still low by any standard," Macklem said in response to a question from MNI. Deputy Governor Sharon Kozicki recently said data like truck and ship movements were helpful ahead of the decision to hold rates on June 4, and Macklem didn't say exactly what role those types of figures will play in the time between this week's 30-day deadline for a U.S.-Canada trade deal and the Bank's July 30 rate decision.

Core inflation measures now running faster than 3% may overstate the broader trend, Macklem said. “There is I think potentially some distortion in our core measures, maybe exaggerating a little bit. Underlying inflation, certainly above 2 (percent) and it’s probably a little bit lower than our preferred measures.” The Bank sets rate to keep inflation in the middle of a 1% to 3% band. (See: MNI INTERVIEW: Mild Stimulus Cures Canada Recession- Ex-Clerk)