Consumer Price Index (Jun.)

The modest increase in the official core inflation figure in June, to 1.3% from 1.1% in the month before, was mainly due to specific base-year effects. We expect underlying inflation to stay at the bottom of the Bank of Canada's 1-3% target range as economic growth disappoints this year and the unemployment rate nudges higher. Under these circumstances, we believe that the Bank of Canada will hold its policy interest rate low for longer than currently priced in markets.