TD Notes Important Week With Canada's CPI Data

07:20 AM EDT, 06/23/2025 (MT Newswires) -- Last week offered a robust set of geopolitical events and data for investors to digest, with top of the agenda the G7 meeting in Alberta, said TD.

There were a few takeaways for Canada, including a commitment of $4 billion in funding for Ukraine and steps to enhance trade with the United Kingdom, noted the bank. However, the principal outcome was the agreement with the United States to work towards a new trade deal within 30 days.

Also on the trade front, Prime Minister Carney announced that Canada will limit steel imports from countries that don't have a free trade agreement with Canada to 2024 levels, which represents 35%-40% of steel brought in from other countries. Carney also indicated that Canada will adjust its tariffs on U.S. steel and aluminum products on July 21, depending on how trade talks with the U.S. administration are progressing.

With some optimism, Bank of Canada Governor Tiff Macklem flagged the potential for a new Canada-U.S. trade deal in a speech last week. The governor also noted last week's release of the BoC's Summary of Deliberations. The Summary detailed the logic behind policymakers' decision to hold its policy rate steady at 2.75% on June 4.

Three particularly significant reasons held sway. First, uncertainty remained very high -- suggesting the need for greater clarity before making any moves. Second, the economy was showing some resilience. Finally, inflation remained relatively firm. Policymakers remain concerned about the opposing impacts on inflation from tariffs and a weakening economy.

For TD's part, it sees the economy slipping into a technical recession this year, paving the way for additional easing.

This week will bring the release of inflation data for May, and consensus for Tuesday's consumer price index report sees a similar print to April's 1.7% year-over-year rate for the all-items measure, stated TD. June could be a different story, however, given the surge in oil prices amid conflict in the Middle East. Since the end of May, WTI prices have shot up by about 20%.

The consensus expectation is also for a dip in the BoC's preferred core inflation measures after their heated April showing.

The bank has seen very little in the way of home price inflation in Canada's housing market recently. However, conditions appear to be turning around.

Both Canadian home sales and average home prices advanced in May, and TD thinks activity will be stronger in the second half, driven by pent-up demand. Homebuilding also had a solid May. Households are also showing some resilience, with Friday's report showing that retail trade volumes advanced 0.5% month over month in April.

However, some downside for Canadian domestic demand could manifest moving forward, given the sharp slowdown the bank is seeing in population growth. Indeed, data last week revealed a significant easing in population growth during Q1.

This cooling is expected to persist and while tariff fallout has stolen all the headlines, slower population gains remain a factor underpinning TD's forecast for subpar economic growth in the coming quarters.

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