By Craig Lord
The annual tempo of inflation held regular at 1.7% final month as cooling shelter prices helped tame worth pressures, Statistics Canada mentioned Tuesday.
Shelter prices rose three per cent in Could, StatCan mentioned, marking a slowdown from 3.4% in April.
The company singled out Ontario as the key supply of lease reduction within the nation. Slowing inhabitants progress and a soar in new provide helped maintain a lid on lease hikes in Could.
Mortgage curiosity prices, in the meantime, decelerated for the twenty first consecutive month amid decrease rates of interest from the Financial institution of Canada.
Economists had broadly anticipated inflation would stay unchanged heading into Tuesday.
The removing of the patron carbon worth continues to drive down gasoline prices yearly, StatCan mentioned, however a smaller month-to-month decline in costs on the pump from this time final yr restricted the drop.
Battle between the US, Iran and Israel within the Center East may restrict reduction Canadians discover on the pumps this summer time, warned RBC assistant chief economist Nathan Janzen.
Issues of wider battle within the area may spur greater oil costs if markets worry manufacturing disruption.
“That’s the major passthrough into client costs instantly, it actually occurs on the pump with greater gasoline costs,” Janzen mentioned of geopolitical instability.
However he famous that the oil worth shock — if it involves go — must final for months earlier than it begins to filter into prices for transportation and costs on the shelf.
The price of meals from the grocery retailer rose 3.3% yearly in Could, half a share level decrease than the hike seen in April.
StatCan mentioned the price of a brand new automobile accelerated in Could, rising 4.9% yearly, thanks largely to costlier electrical automobiles.
Meals and automobiles are two areas the place Canada’s tariff dispute with the US is likely to be displaying up within the inflation information, Janzen mentioned, however he cautioned it’s nonetheless too quickly to see broad results from the commerce struggle in worth information.
Inflation excluding tax modifications — stripping out influences from the carbon worth removing — was additionally regular at 2.3% final month.
Financial institution of Canada governor Tiff Macklem mentioned final week that the central financial institution can be paying nearer consideration to this determine because it tries to look previous momentary impacts to see what’s actually taking place to inflation amid tariffs.
The central financial institution’s intently watched core inflation metrics, in the meantime, ticked down a tenth of a share level to a few per cent in Could.
The Financial institution of Canada held its coverage price regular at 2.75% earlier this month for the second choice in a row because it waits for extra readability on the shifting commerce coverage and its influence.
BMO chief economist Doug Porter mentioned in a be aware to purchasers Tuesday that core inflation was shifting in the proper path, however probably not sufficient by itself to persuade the Financial institution of Canada to chop once more.
The central financial institution will get a have a look at June inflation figures earlier than its subsequent price announcement on July 30, and Porter mentioned financial policy-makers will probably must see underlying inflation drop beneath three per cent to warrant a return to cuts.
“The information over the following 5 weeks will in the end drive the choice, however the odds of a July lower are decrease now on the so-so CPI,” he mentioned.
As of Tuesday afternoon, monetary markets have been pricing in odds of a quarter-point lower on July 30 at 34%, in accordance with LSEG Information & Analytics.
A separate launch from StatCan on Tuesday gave a flash estimate for manufacturing gross sales in Could. Early indicators recommend a 1.3% month-to-month drop, coming off a 2.8% decline in April as Canada’s tariff dispute with the U.S. weighed on exercise.
TD Financial institution senior economist Andrew Hencic mentioned in a be aware Tuesday that the commerce struggle is prone to maintain the economic system mushy within the months forward, dampening inflation pressures going ahead.
“As has been the case this yr, the outlook is closely depending on how commerce negotiations evolve, however we imagine that the mushy financial backdrop ought to give the BoC house to ship two extra cuts this yr,” he mentioned.
Janzen is much less positive extra rate of interest cuts are warranted.
Whereas there are indicators of financial weak spot in trade-sensitive manufacturing information, he famous that client spending has held agency to date within the commerce dispute. Authorities spending can also be anticipated to ramp up within the coming months, he mentioned, serving to to assist progress within the face of tariffs.
“In opposition to that backdrop, our personal base-case assumption is not any extra rate of interest cuts wanted from the Financial institution of Canada,” Janzen mentioned.
“But when the economic system have been to melt greater than we anticipate, there may be room for the central financial institution to step in with extra assist.”
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Final modified: June 25, 2025
