iStock-1398965606
The rate of inflation slowed in May, with the consumer price index increasing 3.4 per cent year over year, Statistics Canada said on June 27.
The slowdown stems mostly from lower gasoline prices, which were down 18.3 per cent from this time last year. Excluding gas, the CPI rose 4.4 per cent in May, after rising 4.9 per cent in April.
CPI rose 0.4 per cent month over month, after rising 0.7 per cent in April.
Grocery prices, however, increased nine per cent from last year.
Mortgage costs were also up, with the mortgage interest cost index rising 29.9 per cent year over year, marking the largest increase on record for the third-straight month. Mortgage costs rose 28.5 per cent in April.
The slowdown in the inflation rate will reduce pressure on the Bank of Canada to raise interest rates again in July. Two key yearly measures tracked closely by the central bank — the so-called trim and median core rates — also dropped sharply, averaging 3.85 per cent from an upwardly revised 4.25 per cent a month earlier, slightly slower than 3.95 per cent expected by economists. Service inflation — another closely watched measure — slowed to 4.6 per cent in May, from 4.8 per cent a month earlier.
Before the release of the May inflation data, only eight out of 33 economists in a Bloomberg survey expected the Bank of Canada to raise rates to five per cent at its next meeting. Tuesday’s consumer price figures, along with gross domestic product and employment data over the next two weeks, will be key input for policymakers.
Still, sticky underlying price pressures could prompt Bank of Canada governor Tiff Macklem and his officials to hike again to squeeze out excess demand in the economy. During their last meeting, they were concerned that monetary policy wasn’t sufficiently restrictive and that inflation could remain stuck above the two per cent target.
With additional reporting from Bloomberg
Comments are closed.