Canada's inflation holds steady at 1.7 percent; Consumers breathe easier, but core pressures persist

Economic Times

7 hours ago

Canada's Inflation Holds at 1.7 percent in May, relief for consumers, but core pressures keep interest rate cuts at bay
Synopsis Canada's inflation held steady at 1.7 percent in May, offering slight relief from recent price hikes. Gas prices dipped due to carbon tax changes, while shelter costs saw a moderate rise. Grocery inflation eased slightly. However, core inflation remains stubbornly high, worrying economists. The Bank of Canada faces pressure to decide on interest rates, with a rate cut unlikely soon. Canada's annual inflation rate remained unchanged at 1.7 per cent in May, mirroring April's figure, Statistics Canada revealed today. At first glance, this stability offers a measure of relief to Canadian households that are still reeling from recent price surges.
ADVERTISEMENT Month‑over‑month, the Consumer Price Index (CPI) rose by a moderate 0.6 percent, driven largely by seasonal travel, accommodation, and energy changes.
Gasoline prices dropped 15.5 percent year‑over‑year, partly due to the removal of the consumer carbon tax, though there was a slight bump month‑to‑month. Shelter costs climbed 3 percent, easing from April's 3.4 percent. Rent increases slowed most notably in Ontario, up just 3 percent year‑over‑year compared to 5.2 percent previously. Grocery prices rose 3.3 percent, a slight reprieve from April's 3.8 percent increase.
While headline inflation paused, core measures stripped of food and energy remained at the upper target threshold of 3 percent, concerning some economists.
Derek Holt of Scotiabank warns that underlying pressures 'remain too high, inflation has yet to be licked'. Indeed, monthly inflation odds suggest only a 34–68 percent chance of a rate hold at the Bank of Canada's July 30 meeting.
ADVERTISEMENT For most Canadians, the price of filling a cart, filling a tank, or paying rent hasn't gotten worse, but it hasn't improved markedly either. The Bank of Canada, which last raised its policy rate to 2.75 percent, is now under pressure to gauge whether this pause signals lasting stability or a false calm. With core inflation still sticky, a rate cut appears unlikely before late summer.Next week's June CPI release (July 15) and the July 30 interest rate decision will be pivotal in shaping mortgage payments, borrowing conditions, and everyday household budgets.
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