BMO on The Day Ahead in Canada

07:35 AM EDT, 07/15/2025 (MT Newswires) -- Canada will release June consumer price index data at 8:30 a.m. ET on Tuesday, noted Bank of Montreal (BMO), adding that inflation is expected to perk up with "challenging" base effects driving much of the acceleration.

The bank is looking for prices to be up 0.2% in the month, lifting inflation to 2.0% year over year from 1.7%. Price pressures are expected to be driven by food and transportation. Concerning food prices, BMO is also predicting to see some tariff pass-through, as highlighted by some grocery chains. Fortunately, energy prices were tame, helping restrain the extent of the headline increase.

Core inflation looks to come in around +0.2%/+0.3% month over month, which would lift the yearly rates about one tick (averaging around 3.1%). Following a surprising strength in April, May saw a modest pullback, but the core metrics continue to run at levels inconsistent with the 2% target. The breadth of inflation worsened in May and will need to improve for the Bank of Canada to gain confidence that price pressures are easing, pointed out BMO.

Following the huge June job gain, it will take an outsized move lower in underlying inflation for the BoC to even consider cutting in July.

Also, on the Canadian docket at 8:15 a.m. ET Tuesday, housing starts are projected to slip 3.4% month over month to 270,000 annualized in June, as overcapacity in Greater Toronto's multifamily segment and elevated construction costs weigh, added the bank.

Also, on the housing front at 9 a.m. ET Tuesday, BMO said that the resale market appears to have firmed up in June, though the market remains broadly balanced at a national level. Regionally, the bank continues to see softness in affordability-challenged areas in Ontario and British Columbia, while Quebec and Atlantic Canada remain home to some of the tightest markets in the country.

BMO estimates national sales activity to be down 2.0% year over year, which could translate to a third straight monthly increase in seasonally adjusted terms. Average prices look to slip 1.0% year over year while the quality-adjusted MLS HPI could remain 3.5% below year-ago levels. While the market is showing some signs of life, it will likely take additional rate cuts and/or more certainty in the economic outlook to kick-start a more meaningful recovery.

Manufacturing sales for May at 8:30 a.m. ET Tuesday are expected to mirror the flash estimate's 1.3% month-over-month decline. This marks the fourth consecutive decline, which tracks the timeline of the February start of the United States Administration's tariff war. Also, new motor vehicle sales should rise 8.0% year over year in May, in line with industry figures on light vehicle sales (+7.9% year over year) but that subsequently slowed to 5.2% year over year in June.

The US dollar (USD) is weaker (BBDXY -0.15%), with the Canadian dollar (CAD or loonie) stronger (CAD per USD -0.16%) early Tuesday, according to the bank.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.