Economists got more or less what they expected from the Consumer Price Index for June, clearing the way for further rate cuts.

Headline CPI rose just 0.1% in June. It was flat on a seasonally adjusted basis. The annual inflation rate dropped to 3.3% from the nine-year high of 3.9% in May. Core inflation rose 0.2% last month, pushing the annual rate down slightly to 2.0%. However, the Bank of Canada is now focusing on the CPIX, which strips out the eight most volatile items, but keeps electricity. With a 2.6% rise in that component in June, CPIX prices rose 0.3% in the month, holding the annual rate steady at 2.3%.

With inflation expected to weaken through the rest of the year, economists are sounding the all-clear for further rate cuts. “With energy prices in full retreat and growth slowing, there is nothing here to block additional Bank of Canada easing,” says BMO Nesbitt Burns.

CIBC World markets says, “We anticipate that the BankÕs new core measure will see a modest improvement in the coming months, easing back towards the mid-point of the inflation target range. There remains scant evidence of a serious wage threat, and unlike the U.S., services inflation has remained largely in check. With the Bank turning dovish on inflation, thereÕs ample room for Dodge and company to offer a few more doses of monetary easing as economic growth disappoints.”

RBC Dominion Securities is a little more cautious, noting that the Bank does have room “to trim rates a little further if economic weakness intensifies. However, with considerable stimulus in the pipeline already, short-term rates are at, or very close to, their trough for this cycle. At 2.0%, old core inflation in comfortably below the 2.7% core rate in the U.S., a plus for the Canadian dollar and fixed income markets.”