Canada’s annual inflation rate cooled more than expected to 2.8 per cent in June, according to data released by Statistics Canada, as gasoline costs fell sharply following the signing of a memorandum of understanding between the United States and Iran. The reading came in below the 2.9 per cent forecast by analysts polled by Reuters and represented a significant decline from the 29-month high of 3.2 per cent recorded in May. The moderation in inflation has been welcomed by economists and policymakers alike, as it suggests that the Bank of Canada’s efforts to bring inflation under control are beginning to bear fruit. The central bank projects that inflation will ease to about 2\u00bd per cent in the second half of 2026, reaching the 2 per cent target by early 2027.<\/p>\n\n\n\n
Gasoline prices were the biggest contributor to the easing in the inflation rate, with the cost of fuel purchased at the pump falling by over 10 per cent in June. On a year-over-year basis, gasoline costs rose at a rate of 20.5 per cent in June, down from a rise of 33.2 per cent in the prior month. Excluding gasoline, the Consumer Price Index was unchanged in June compared with May, at 2.2 per cent. The decline in gasoline prices reflects broader trends in global energy markets, including the geopolitical developments that have influenced oil prices. However, the war in the Middle East has since flared up again, and gasoline costs have started inching up, suggesting that inflationary pressures may persist.<\/p>\n\n\n\n
Transportation costs, which account for around 18 per cent of the CPI basket, rose by 6.7 per cent in June on an annual basis. Other items in the basket that grew at more than 3 per cent were food, which rose by 3.5 per cent in June, and the recreation, education and reading category, which increased by 3.8 per cent. However, the rise in grocery prices cooled slightly, with the cost of food purchased from stores rising by 3.9 per cent on an annual basis last month, down from 4.3 per cent in May. June was the 17th consecutive month that grocery price inflation outpaced the all-items CPI, reflecting the persistent pressure that food costs have placed on Canadian households.<\/p>\n\n\n\n\n\n\n\n
The core measures of inflation, which are closely watched by the Bank of Canada to gauge underlying inflation trends, eased further in June. CPI-median was down to 1.9 per cent from 2.1 per cent in May, while CPI-trim fell to 1.8 per cent from 2 per cent in the prior month. These core measures are important indicators for the central bank, as they strip out volatile components such as energy and food prices to provide a clearer picture of underlying inflationary pressures. The easing in core inflation suggests that the broader trend in prices is moving in the right direction, providing the Bank of Canada with greater confidence that inflation is returning to target.<\/p>\n\n\n\n
The Canadian dollar slid following the inflation data, weakening 0.18 per cent to C$1.4045 to the U.S. dollar, or 71.20 U.S. cents. The currency’s performance reflects broader trends in global markets, including the strength of the U.S. dollar and ongoing trade tensions between Canada and the United States. The inflation data provided some relief to markets, as it suggests that the Bank of Canada may have room to maintain its current monetary policy stance rather than having to tighten further. However, the central bank remains vigilant and will continue to monitor inflation developments closely as it seeks to achieve its 2 per cent target.<\/p>\n\n\n\n
Economic growth in Canada has been weak but is set to pick up, according to the Bank of Canada’s Monetary Policy Report. After a weaker-than-expected start to 2026, GDP growth is projected to be slightly stronger in 2027 and 2028. The central bank’s outlook reflects expectations that the Canadian economy will gradually recover from the soft patch experienced in the first half of the year. However, risks to the outlook remain, including the potential for further trade disruptions and geopolitical uncertainties that could weigh on economic activity. The Bank of Canada continues to monitor these risks closely and stands ready to adjust policy as needed.<\/p>\n","protected":false},"excerpt":{"rendered":"
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