Annual price growth hits lowest level since June 2021
Canada’s inflation rate came in at 3.4% last month, marking the smallest annual increase for nearly two years as gasoline prices posted a sharp decline.
Statistics Canada revealed on Tuesday that those plunging gas prices helped push the consumer price index (CPI) dramatically downwards, with the cost of gasoline down by 18.3% in May over the same month in 2022.
Still, inflation excluding gas prices remained resolutely high. Mortgage interest costs continued to surge and accounted for a large portion of the overall yearly CPI increase, spiking by nearly 30% compared with May 2022.
Food price growth, meanwhile, saw little change from April, coming in at 9.1% and ticking down by 0.1% on a monthly basis.
The new figures see inflation inch closer to the Bank of Canada’s 2% target, with annual price growth largely in line with central bank expectations of a 3% level in the summer.
Nonetheless, underlying inflation trends in Canada continue to run “well above” the Bank of Canada’s target rate, RBC economist Claire Fan indicated in the bank’s reaction to the CPI report, meaning another rate hike in July is still likely.
The central bank has introduced a series of rate increases since March last year in an effort to tackle an inflation crisis that saw annual price growth hit a 39-year high of 8.1% last June.