Canada’s inflation rate continued to fall in April, increasing the chances of a summer interest-rate cut.

The consumer price index rose 20 basis points year-over-year in April to 2.7% compared with 2.9% a year earlier, Statistics Canada reported Tuesday. The reduction moved the country’s core inflation rate closer to the Bank of Canada’s 2% target, improving commercial real estate investors’ hopes for long-awaited borrowing-cost relief.

Tiff Macklem, the BoC’s governor, has sent several signals recently that the central bank will reduce its key overnight rate this summer. The bank is shifting away from a quantitative tightening strategy implemented to offset the effects of the COVID-19 pandemic and other economic factors.

The 2.7% figure was in line with analysts expectations.

CIBC Deputy Chief Economist Benjamin Tal and other leading analysts have cited high borrowing costs tied to the BoC overnight rate as a key driver of shelter-cost increases. Shelter-cost inflation is viewed as a primary contributor to overall inflation.

But the BoC will want to see further confirmation of inflation’s downward trajectory. So, a July interest-rate cut is more likely, said Leslie Preston, a managing director and senior economist with TD Financial in Toronto, in a research note provided to Connect.

“But June or July, Canadians can be increasingly confident that alongside lower inflation, interest rates are headed lower soon,” she wrote.

Get Ready for Canada Kick-off

Connect CRE will hold its inaugural Canada Kick-off Event in Toronto on June 11. This will be Connect’s first commercial real estate industry conference in Canada. Panelists will include Syl Apps, managing director and co-country head for Hines; Lindsay Brand, chief investment officer at Concert Properties; Mark Kenney, CEO of Canadian Apartment Properties REIT; and, Marie-France Benoit, Avison Young’s director of Canadian market intelligence. Come and gain insights from industry leaders on such matters as buyer sentiment amid a lower interest-rate environment, cross-border commercial real estate transaction trends, and investors’ outlook for 2024 and beyond. Register today.