BMO on The Day Ahead in Canada

07:48 AM EDT, 06/24/2025 (MT Newswires) -- The Canadian consumer price index report for May at 8:30 a.m. ET is the key release on Tuesday, with implications for the Bank of Canada, said Bank of Montreal (BMO).

Canadian inflation is expected to slow again in May, though unlike in April, it's not due to the one-time elimination of the consumer carbon tax, noted the bank. It's more to do with cooling shelter costs due to falling prices and easing mortgage interest costs, along with a smaller-than-normal seasonal increase in gasoline prices, that are keeping inflation restrained.

BMO's call for 0.3% month over month in headline CPI would cut inflation a couple of ticks to 1.5% year over year. Excluding the impact of the carbon tax, inflation would be closer to 2%.

Core inflation looks to come in around flat or at 0.1% month over month, which would bring the yearly rates down around three ticks -- averaging around 2.8%/2.9%. There was surprising strength in the April core CPI metrics, with both the Trim and Median accelerating above 3% for the first time in nearly a year. The latter clearly caught the BoC off guard, and was a major reason why policymakers held rates steady in June, pointed out the bank.

The May and June inflation reports will be key inputs for whether the BoC considers cutting rates at the July policy announcement.

Investors will also get the advance read on manufacturing sales for May. BMO will have a close eye on the May data flow, with retail already posting a weak result.

The Canadian dollar (CAD or loonie) starts Tuesday at $1.372/USD (72.9 US cents), added the bank.

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