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Free AccessMNI: Canada Inflation Is Slowest In 2 Years As Gasoline Slides
Canada’s inflation rate slowed as expected to 3.4% in May from 4.4% in April as past gasoline price hikes fell out of the index, Statistics Canada said Tuesday, while core rates slowed by about half as much.
The moderation in headline prices matched the forecasts of economists, who said before the release it may not be enough to deter the Bank of Canada from raising borrowing costs again next month. Governor Tiff Macklem has cited dangers of stickier core prices leaving inflation stuck above his 2% target even as he forecasts CPI slowing to 3% in the near term.
The trim core inflation rate slowed to 3.8% from 4.2% and the median core rate to 3.9% from 4.3%. The trim rate is now the slowest since November 2021.
StatsCan suggested caution interpreting a decline led by base-year effects and said “price increases observed in the first half of 2022 will continue to fall out of the 12-month price movement.” Gasoline prices led the deceleration, down 18% from a year ago and falling 0.8% in May after a 6.3% rise in April. Excluding gasoline inflation slowed to 4.4% from 4.9%.
Consumer prices are now rising at the slowest pace since June 2021, though they have topped the Bank of Canada's target since March of that year. The central bank hiked rates eight consecutive times through January including a shock 100bp move in July after inflation surged past 8%, then signaled a pause. Earlier this month Governor Macklem unexpectedly resumed hiking with a quarter point move to 4.75%, the highest since 2001, and outlined a host of upside risks. Officials will still see other important data before the July 12 decision including a monthly GDP report on Friday and their own quarterly surveys of business and consumer expectations.
One major source of inflation in the near term is the record 30% jump in mortgage costs, followed by high-profile grocery prices that are up 9% from a year ago.
Consumer prices also rose 0.4% in May from April, matching economist forecasts and slower than the prior 0.7% increase.
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