SocGen Says Canada's CPI on Tuesday Will Attract "Close Interest"

07:35 AM EDT, 06/24/2025 (MT Newswires) -- Canada's consumer price index for May at 8:30 a.m. ET on Tuesday will attract "close interest," said Bank of Montreal (BMO).

The Bank of Canada may be inclined to lower rates once more, having returned policy to neutral at 2.75%, noted SocGen. The OIS curve is pricing just over one cut by October, which seems a long way away if the downside risk to growth in Q2, flagged in the latest forecast, does materialize.

Consensus is for headline CPI to slow to 1.7% year over year in May and core to 3.0%, wrote the bank in a note to clients.

Governor Tiff Macklem in a speech in Newfoundland last week indicated that If the current United States tariffs and counter-tariffs remain in place, past experience suggests pass-through of about 75% of the costs of tariffs over roughly a year and a half.

Macklem admitted that underlying inflation could be firmer than thought, which doesn't indicate a dovish bias and willingness to lower rates to the lower end of the neutral range, stated SocGen.

USD/CAD backed away from the 1.38 handle (50dma 1.3796) after rebounding 1.7% from last week's low. Will sellers re-emerge and target a return below 1.36 asked the bank.

CFTC data published on Monday revealed short Canadian dollar (CAD or loonie) positions were trimmed further last week to 22.5%. The two-year GCAN yield has oscillated in a narrow 30bps range (2.44%-2.73%) over the last few months opposed to almost 80bps for the 10-year, according to SocGen.

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