The June U.S. consumer price index report offered encouraging signs that inflationary pressures may be easing, but geopolitical uncertainty could complicate that progress.
BNN Bloomberg spoke with Reid l’Anson, economist at Kpler, about the latest CPI figures and the implications for monetary policy and the Canadian and U.S. economies.
Key Takeaways
- The one-month pace of core inflation decelerated sharply in June, potentially giving the U.S. Federal Reserve more flexibility on interest rates.
- Kpler expects the Bank of Canada to remain on hold through year-end, while the U.S. Fed could pause or potentially raise rates later this year.
- Oil shipments through the Strait of Hormuz had recovered to about eight million barrels a day before renewed tensions caused vessel traffic to fall again.
- U.S. inflation pressures appear stronger than those in Canada because of resilient consumption, AI-related capital spending and a healthier underlying economy.
- U.S. consumer spending remains concentrated among the wealthiest households as declining real wages and a lower savings rate create economic risks.
Read the full transcript below:
ROGER: All right. So, the June CPI report is out. You saw the markets seem happy with it. For more reaction and analysis, let’s go to Reid l’Anson, economist at Kpler. And Reid, thanks very much for joining us.
REID: Thanks for having me.
ROGER: All right. What number stands out for you?
REID: Honestly, it was kind of interesting. First, taking a look at headline. Obviously, finishing lower on a decline in energy prices across the stack. But even looking at core inflation in June, the one-month pace of core inflation showed a large deceleration this month. So, in general, I think this gives the Fed a bit of, a bit of wiggle room here, maybe not needing to raise rates as aggressively as the market was first expecting. So, I think first takeaway: The report was encouraging that maybe inflation could be easing off here. Of course, there are big questions about what’s going to happen with the Strait of Hormuz and energy prices moving forward. But at least this report looked encouraging.
ROGER: Kash, do you want to join in?
KASH: Yeah, sure. So, do you think—I mean, it’s a bit premature here—but is there a world where now, all of a sudden, inflation’s cooling in the U.S.? They can, they can push for a rate cut while rate—or inflation—in Canada is actually sticky or going higher, and a world where the U.S. is cutting rates and Canada is raising rates. Do you see, you know, that potentially coming to fruition?
REID: Look, our base case right now is that the Bank of Canada is going to remain on pause through the end of the year. I know we, we did get some movement, maybe pricing a hike out of the BoC later this year. The problem for the United States, I think, is that the U.S. economy still looks pretty healthy. Consumers are picking up into Q2. The AI capex spend remains pretty strong, and so I think, at a minimum right now, the Fed’s going to have to remain on pause. And so, this is kind of the dynamic you have between the Fed and the Bank of Canada: BoC likely remaining on pause; the Fed, pause, possible hike later this year. Maybe the hike has fallen back a bit on this month’s CPI report.
ROGER: What could change things for this? Could be—I mean, we’re looking at Iran, and maybe it’s flaring up again. Is that a factor?
REID: Huge factor. Obviously, energy prices have been a big disinflationary driver of that CPI report last month. But, you know, oil prices up 10 per cent yesterday, up another 3.5 per cent today on Brent. This is a major risk factor. And, you know, just looking at Kpler data, we were starting to make progress with volumes along the Strait through the second half of June, first half of July. We were, you know, on a daily basis, you know, eight million barrels per day was managing to flow out of the Strait. We were seeing transits of 30 per day, up from less than 10. That’s completely fallen back now with the rise in tensions along the Strait. And so, of course, there are real concerns that this could push up on energy prices again.
ROGER: Kash?
KASH: Reid, how are you folks thinking about inflation in, in Canada versus the U.S.? Do you have a view that there’s more inflationary pressure on one market more than the other, or do you feel that they’re just moving in lockstep?
REID: I think the U.S. probably has more inflationary pressure right now. Even going into the Iran conflict, U.S. inflation was trending higher, and I think this is kind of being driven by the reality that the AI capex boom continues, at least for now, and that is kind of creating this underlying pressure for U.S. inflation. And then, like I mentioned, to start the year, U.S. consumers looked kind of weak, but that has reversed, and they have managed to spend through the initial energy inflation that we saw into quarter two. The problem for Canada right now is the underlying economy is much weaker, and so I think there’s less inflationary pressure there. Of course, you do have the concern around energy prices, like the United States, but again, you know, in the U.S., this AI capex build remains a major driver, at least for now.
ROGER: And one of the—I’m just looking at some of the numbers here—the shelter was up by 0.1 per cent. Any concerns? They’re calling it soft.
REID: Yeah, no, I think it was interesting. If, again, if you look at that core inflation number, a big part of that is shelter inflation, off a lot from what we’ve seen over the last several months. Of course, there are some—were some measurement issues with the government shutdown late last year, but again, that’s an encouraging sign. Core inflation has been persistently above two per cent for the last several years. Shelter is a critical driver of that. So, again, at least this month, an encouraging sign.
ROGER: All right, Kash, you want the last question?
KASH: Yeah, with the U.S. consumer being stronger, are you folks seeing that strength come in very sort of specific pockets? For us, it doesn’t feel like the strength of the overall U.S. economy is really as widespread or as healthy as we’d like it to be. We’re seeing it very concentrated in certain markets, where other markets are really struggling. Are you seeing the same thing, or are you seeing something different?
REID: Yeah, completely agree. It’s, you know, that top 10 per cent is driving most of the spending, and you can—you know, this, you know, issue with the U.S. consumer is, again, it’s very top-heavy. Nominal wage growth is not keeping up with inflation either, and so your real wage growth is actually declining right now. Real wages are declining right now. That’s a problem. That could be a headwind that we need to keep an eye on. But again, it’s, you know, the U.S. consumer very much is top-heavy. Another thing that we’ve seen as well: The U.S. savings rate has declined a lot, again, because real wages are declining. So, U.S.—you know, the U.S. consumer has shown an ability to spend through the energy-induced inflation. We’ve seen most of it’s very top-heavy. There are critical headwinds, especially around real wages, that we’ll need to keep an eye on.
ROGER: All right, we have to wrap it up there, Reid. But thanks very much for joining us.
REID: Thanks.
ROGER: Reid l’Anson, economist at Kpler.
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This BNN Bloomberg summary and transcript of the July 14, 2026 interview with Reid I’Anson are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
