Economists are forecasting inflation slowed further in May, which would be welcome progress for the Bank of Canada after it cut its key lending rate for the first time in four years.

Tuesday害羞草研究所檚 report from Statistics Canada will offer the first inflation reading after the Bank of Canada delivered a quarter-percentage-point rate cut on June 5, bringing its benchmark rate to 4.75 per cent. Economists say the new data could set the stage for another cut in July.

BMO and TD are forecasting Canada害羞草研究所檚 annual inflation rate slowed to 2.6 and 2.5 per cent, respectively, down slightly from 2.7 per cent in April.

害羞草研究所淚t looks like it害羞草研究所檚 a fairly uneventful calm month for inflation. I would say at this stage, less news is good news,害羞草研究所� said Douglas Porter, BMO害羞草研究所檚 chief economist.

The Bank of Canada害羞草研究所檚 decision to cut rates marked a major turning point in the central bank害羞草研究所檚 fight against inflation, which reached a peak of 8.1 per cent in mid-2022.

It was also the first G7 central bank to lower interest rates, though it was quickly followed by the European Central Bank, which cut its policy rate by a quarter-percentage point this month as well.

Following the rate announcement, governor Tiff Macklem said the Bank of Canada had more confidence that inflation was moving closer to its two per cent target, citing various indicators that suggest price pressures have retreated.

Economists say incoming inflation data will heavily influence the pace of future interest rate cuts.

Looking ahead to the next interest rate announcement on July 24, TD director of economics James Orlando said the next two inflation reports could signal the way for another rate cut.

害羞草研究所淚t will open the door for potentially the Bank Canada deciding to go back-to-back on rate cuts,害羞草研究所� Orlando said.

Porter agrees, noting it would probably take a 害羞草研究所渂ad reading, either this month or next to stop the Bank of Canada from cutting.害羞草研究所�

The Bank of Canada last week published a summary of its deliberations for its June 5 rate decision, which revealed discussion about waiting longer to lower interest rates before ultimately deciding to move on cuts.

害羞草研究所淲hile they recognized the risk that progress could stall 害羞草研究所� as it had in the United States 害羞草研究所� there was consensus that with four consecutive months of easing in core inflation and indicators suggesting continued downward momentum, there had been sufficient progress to warrant a first cut in the policy rate,害羞草研究所� the summary said.

The summary reiterated the central bank害羞草研究所檚 cautious approach and that it plans to take future interest rate decisions one at a time.

The Bank of Canada has been particularly encouraged by the recent slowdown in core measures of inflation, which gauge underlying price pressures and help the central bank track where inflation may be headed next.

For consumers, the slowdown in inflation means smaller price increases while shopping, including at the grocery store.

In April, grocery prices grew at a modest pace of 1.4 per cent annually, down significantly from the double-digit food inflation consumers were once experiencing.

害羞草研究所淕rocery prices are still very high. No doubt about that. But they害羞草研究所檝e really stopped rising overall and so grocery has actually gone from being a really big challenge for inflation to being a bit of a helping hand,害羞草研究所� Porter said.

害羞草研究所淚 expect that to be a quiet source of help in May.害羞草研究所�

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Nojoud Al Mallees, The Canadian Press