Customers at a market in Toronto. Today’s inflation data release follows May CPI that came in flat at 1.7 per cent. (Photo by Zou Zheng/Xinhua via Getty Images) · Xinhua News Agency via Getty Images
Canada’s inflation rate rose in June as the Consumer Price Index (CPI) increased to 1.9 per cent annually from 1.7 per cent the month before, according to Statistics Canada data released Tuesday. Economists broadly agree that the new data make a Bank of Canada interest rate cut on July 30 unlikely.
On a monthly basis, CPI increased 0.1 per cent in June. Seasonally adjusted, CPI rose 0.2 per cent.
Gas prices remained lower compared to a year ago but had a lesser effect on keeping inflation down than in May, while prices increased for goods like cars and furniture.
Economists had expected inflation to rise to two per cent in June, according to consensus forecasts published by CIBC.
“The quick read is that the overall report really gives the Bank of Canada no opening to cut interest rates at the upcoming meeting on July 30,” BMO chief economist Douglas Porter wrote in a note about the data.
Measures of core inflation — which the Bank of Canada (BoC) favours — remained high, with CPI-median rising 0.1 percentage point to 3.1 per cent from last year and CPI-trim flat at three per cent.
“Simply put, underlying inflation remains stubbornly strong,” Porter wrote, noting the surprising job gains reported last week that had already made a cut less likely. “We’ll need to see a material deceleration in core for a cut in even the September meeting to be in play, barring a steep deterioration in the economy (which can’t be ruled out with the ongoing tariff uncertainty).”
TD Bank economist Andrew Hencic also says a July cut is unlikely, and suggests cuts remained possible in 2025, with the ongoing Canada–U.S. tariff narrative a key factor.
“Looking forward, the course of trade negotiations and evidence of whether June’s healthy labour market report was a one-off, or the start of a new trend, will be crucial,” Hencic wrote.
“Ultimately, we believe that absent a quick resolution on trade, the economic backdrop should give the BoC space to deliver more easing this year.”
The persistently high core inflation numbers are due to two factors, BMO’s Porter says. First, shelter costs tend to shift slowly — with rent, “the single biggest contributor to inflation over the past year,” rising 4.7 per cent from last year, and mortgage costs declining but “still a meaty” 5.6 per cent. The second factor is the trade war’s impact on durable goods and some groceries, Porter writes.
Inflation on grocery prices remained higher than the headline rate, but slowed from the month before — a 2.8 per cent year-over-year increase in June following a 3.3 per cent rise in May.
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