BOC: Some Analysts See May CPI Data Bolstering July Cut Chances (1/2)

Analysts' interpretations of the May CPI data were mixed, in keeping with a relatively mixed report that was broadly-speaking in line with expectations. Below are a few opinions in order of most dovish-to-hawkish interpretations for BOC policy, particularly re a July cut which still appears to be the consensus call (though still only 1-in-3 probability per rate market pricing, little changed from pre-data). Starting with Desjardins, TD, CIBC and RBC which viewed the report as relatively benign:

• Desjardins continues to expect a July cut after a "good" inflation reading: "The May 2025 inflation print was good all around. Of concern for the BoC at its June meeting. was the recent reacceleration in core inflation measures. Our view was that this boost was temporary, and the turn in underlying inflation in May suggests that assertion may be correct. And with headline inflation below 2% and likely to remain low for the next year as a result of the elimination of the consumer price on pollution and weaker growth,  inflation expectations should start to come down. If they do, this will give the Bank of Canada even more room to ease policy than it might have had otherwise. Consequently, after leaving the policy rate unchanged in June due to the uncertainty of the tariff-impacted economic outlook and accelerating core inflation, we think the BoC will resume cutting at its July meeting."
• TD saw the report as a "relief", and also sees a July cut: "Overall, the combination of stable headline inflation alongside some modest progress across core measures will be a relief for BoC officials, even if it falls short of their desire to see inflation "contained" ahead of the July policy decision. With one more CPI print due before July 30th, today's report was never going to give the Bank a green light to cut, but it could have taken a July cut off the table entirely if core inflation measures continued to strengthen. The path to a July cut remains intact, but we still need to see more evidence of growth headwinds materializing with industry-level GDP on Friday, and today's progress sustained through the June CPI report."
• CIBC saw the data as "a step in the right direction" for the July cut they expect. The BOC "will need to see the moderation in core measures maintained in the next report to deliver the July cut that we expect. Tariff impacts will become more evident in the releases ahead, but we look for waning demand tied to the rise in the unemployment rate to provide an offset, along with the appreciation in the Canadian dollar, and a deceleration in shelter inflation."
• RBC continues to see no further rate cuts, though noted overall that the report showed inflation "cool" in May: "The Bank of Canada appears to have reached the end of its cutting cycle, with the policy rate now in the middle of the neutral range. While it has left the door open to further easing, that would likely depend on clearer signs of economic weakness alongside contained inflation. In the near term, tariff-related uncertainty could keep (after-tax) inflation slightly elevated, but we continue to expect it to trend close to target further out."