RBC Economics forecasts headline inflation falling in June as gasoline prices retreat
Canada's headline inflation rate is expected to have eased to 2.8% year-over-year in June, down from 3.2% in May 2026, according to a new analysis from RBC Economics. May's reading was the highest annual figure since December 2023.
Statistics Canada is scheduled to release the June Consumer Price Index (CPI) data on Monday, July 21.
The anticipated moderation is largely energy-driven. In a note to clients on Friday, Nathan Janzen and Abbey Xu of RBC Economics said gasoline prices declined approximately 10% from May, while fuel oil and other fuels fell roughly 6.3% over the same period.
"Energy prices are still expected to remain higher from a year ago, but their contribution to headline inflation should moderate," RBC Economics said.
Read more: Why Canadians won't spend, even when they can afford to
Food and core prices hold close to target
Food price inflation is forecast to ease only modestly. RBC Economics projected a reading of 3.6% year-over-year in June, down from 3.8% in May, reflecting continued pass-through from elevated fertiliser and fuel costs affecting grocery supply chains.
The core picture is more reassuring. "Outside of more volatile components, inflation pressures are expected to remain broadly stable," RBC Economics said.
The firm expects inflation excluding food and energy to hold near 1.6% year-over-year, little changed from May, while the Bank of Canada's (BoC) preferred core measures are likely to remain consistent with the central bank's 2% target.
Read more: Could the Bank of Canada hike interest rates before the end of 2026?
What the data means for mortgage borrowers and brokers
The anticipated June moderation reinforces the BoC's standing argument: that elevated energy costs have not yet spilled over into broader consumer prices.
Policymakers have repeatedly said they are focused on whether commodity price movements feed through to a wider range of goods and services.
To date, RBC Economics said, "there has been little evidence of such second-round effects," a conclusion consistent with the central bank's own communications.
The Bank of Canada held its overnight rate at 2.25% at its July 15 decision, its sixth consecutive hold, keeping the prime lending rate steady at 4.45%.
Economists at Scotiabank, RBC, and TD Economics have all indicated the central bank is in monitoring mode, seeking clarity on key risks before moving.
Jamie David of Ratehub .ca says fixed mortgage rates are facing upward pressure as bond yields rise, while leading economists say the Bank of Canada is likely to remain on hold unless inflation risks intensify.https://t.co/w1m7jx62GG
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 16, 2026
RBC Economics said its base case assumes inflation will gradually return toward the 2% target over the forecast horizon, with the central bank remaining on hold through 2026.
The BoC is next scheduled to meet on September 2, and will have both June and July inflation data in hand before that decision.
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