Everything You Need to Know on Monday: Economists Say BoC Could Cut Interest Rates Again in July if Inflation Keeps Cooling

Good morning mooers! Here are things you need to know about today's market:

● S&P/TSX 60 Index Standard Futures are trading at 1,299.60, up 0.48%

● Economists say BoC could cut interest rates again in July if inflation keeps cooling

● Alberta oil and gas sector exceeded flaring limit in 2023, data shows

● Stocks to watch: Shopify

Today, the Canadian dollar is trading at 73.11 cents US, a slight increase from Friday.

S&P/TSX 60 Index Standard Futures are trading at 1,299.60, up 0.48% from previous close.

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's 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's annual inflation rate slowed to 2.6 and 2.5 per cent, respectively, down slightly from 2.7 per cent in April.

"It looks like it's a fairly uneventful calm month for inflation. I would say at this stage, less news is good news," said Douglas Porter, BMO's chief economist.

The Bank of Canada's decision to cut rates marked a major turning point in the central bank's 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.

"It will open the door for potentially the Bank Canada deciding to go back-to-back on rate cuts," Orlando said.

Porter agrees, noting it would probably take a "bad reading, either this month or next to stop the Bank of Canada from cutting."

For the first time, Alberta's oil and gas industry has exceeded the province's own regulatory limit for natural gas flaring.

A tally by The Canadian Press of Alberta Energy Regulator data shows oil and gas companies in the province flared approximately 754 million cubic metres of natural gas last year, exceeding the annual provincial limit of 670 million cubic metres.

Flaring refers to the practice of burning off the excess natural gas associated with oil production. Though it is better for the environment than some other methods of gas disposal, it still releases harmful substances into the atmosphere.

The AER declined to comment on the findings, referring questions about possible penalties or other actions to the provincial government instead. But a 2022 report by the regulator on oil and gas emissions shows flaring volumes in Alberta have been increasing since 2016 and nudged close to the regulatory limit in 2022.

In that report, the AER said it "expects flaring to continue to increase" in the future, even as the regulations themselves aim to have the oil and gas sector "continue to reduce" the volume of flare gas released.

The Minneapolis-based retailer said that vendors using Shopify’s e-commerce platform can now apply to sell their products on Target’s marketplace, Target Plus. Select Shopify clients will also be able to sell in Target stores.

The partnership, which is the first of its kind for Target Plus, will help broaden the marketplace’s assortment of merchandise and accelerate its growth, said Cara Sylvester, Target’s chief guest experience officer. Target and Shopify will share insights on trends — such as products that are being mentioned on social media — and react quickly to offer popular goods on the marketplace, she added.