INSTANT VIEW-Canada's annual inflation rate drops to 1.7% in April

TORONTO, May 20 (Reuters) - Canada's annual inflation rate in April fell to 1.7% from 2.3% in March as overall energy prices plunged 12.7% after the removal of a federal consumer carbon tax, Statistics Canada said on Tuesday.

Market reaction: CAD/

Link: https://www150.statcan.gc.ca/n1/daily-quotidien/250520/dq250520a-eng.htm?HPA=1

COMMENTARY

ANDREW GRANTHAM, SENIOR ECONOMIST, CIBC CAPITAL MARKETS

"Headline inflation suddenly looks less taxing for the Bank of Canada, due to the elimination of the consumer carbon tax and the downward impact of that on gasoline prices, but some core measures remain a concern."

"Signs of renewed weakening in the economy on one hand, as shown by the latest employment data, but stronger core inflation on the other makes for a tough decision for the Bank of Canada at its early June meeting."

DARCY BRIGGS, PORTFOLIO MANAGER, FRANKLIN TEMPLETON CANADA

"Ex-food and energy was probably a little bit hotter than expected. You might see a bit of the tariff impact starting to show up."

"I think it would give the Bank of Canada a chance to pause even further because of a little bit of strength outside of food and energy but nothing to cause the Bank to get overly concerned."

"As the year progresses, the growth angle should supercede the inflation angle if the tariff impact is fairly substantial which markets are evaluating on a daily basis."

ANDREW KELVIN, HEAD OF CANADIAN AND GLOBAL RATES STRATEGY AT TD SECURITIES

"It really comes back to this notion of whether or not the BoC needs to see realized weakness in the economy to cut rates.

Because right now, if you are just seeing the data that's in front of them, it does not suggest to them that they need to make a rate cut. But obviously the significant uncertainty around trade tensions, would be supportive of additional fiscal signals, so it creates a very difficult balance."