Canada: Inflation ebbs in June from May
Latest reading: Consumer prices were up 2.8% in annual terms in June, following a 3.2% rise in the previous month. The reading was below market expectations and within the Central Bank’s 1.0–3.0% inflation target range.
Relative to the prior month’s figures, there were reduced price pressures for housing (+1.5% in annual terms vs +1.7% in May), transportation (+6.4% vs +8.1% in May), food (+3.5% vs +3.7% in May) and clothing and footwear (+0.8% vs +1.5% in May). In contrast, price pressures were higher for recreation and culture in June (+3.8% vs +2.8% in May).
Meanwhile, core consumer prices increased 2.1% in annual terms in June, following a 2.2% rise in the prior month.
Lastly, consumer prices fell 0.35% in June on a month-on-month basis, following a 0.95% rise in the prior month.
Panelist insight: TD Economics’ Leslie Preston said:
“June’s inflation print came in a little cooler than expected. However, the rise in oil prices in recent weeks means that the downdraft from lower gasoline prices is likely to evaporate in July’s CPI. With oil prices remaining below recent highs, we still think inflation has peaked in Canada this year.”
EIU analysts commented on the outlook:
“Canada has not yet secured a deal to avoid further US tariff increases, suggesting that tariff uncertainty will linger in the near term. Despite this, we expect headline inflation to rise from 2.1% in 2025 to 2.6% in 2026, driven primarily by higher oil prices linked to the Iran conflict and persistent services inflation. However, softer domestic demand, moderating wage growth and easing energy prices later in the forecast horizon will help to contain broader price pressures and support a gradual convergence towards the BoC’s 2% target in 2027.”