June saw some volatility in the markets as the world continues to play the wait-and-see game with a sustained direction on where US interest rates are going. With June wrapped up, we also concluded an overall healthy first half of the year.
In June, the Bank of Canada made the first 0.25% interest rate cut to its overnight rate, bringing it to 4.75%. This was welcome to Canadian consumers and businesses as the Bank of Canada rate dictates interest on debt such as mortgages and vehicles. Canada’s first quarter GDP numbers were softer than expected, which is an indicator of more rate cuts. However, the Bank of Canada signaled that it would need to see further sustained declines in inflation to continue with more rate cuts, which didn’t come to fruition last month.
In June, the Canadian reported headline inflation number ticked back up to 2.9% from the previous reading of 2.7%. Market expectations for the reading was 2.6%. This uptick resulted in the Canadian market to pull back on fears that further rate cuts may not be as robust as the market hopes for.
South of the boarder, the US reported headline inflation ticked down to 3.3% from the previous month at 3.4%. This was an unexpected but welcome surprise to economists that thought it would stay at 3.4%. The Federal Reserve in the US has yet to make a rate cut this year, but any time there is an inflation reading that surprises to the downside, it helps boost the prospect of a rate cut later this year.
