The slowdown in inflation continued in June as the consumer price index in Canada stood at 2.8%, down from 3.4% measured in May.
The inflation rate in Canada was 2.8% in June, down from last month.
It was the drop in gasoline prices that had the most impact in June.
Inflation for food purchased from grocery stores, which remained very high at 9.1%, and the sharp rise in mortgage interest costs (30% year-on-year) contributed the most to inflation in June.
Core inflation – around 4% – remains above the Bank of Canada’s target.
With this decline, the inflation rate is approaching the Bank of Canada’s target range – around 2% – for the first time in more than two years. A news that delighted the Minister of Finance, Chrystia Freeland. “This is the lowest rate in two years,” she said on a conference call from New Delhi on the sidelines of the G20 meeting.
While the slowdown in inflation was fairly broad-based, it was once again lower gasoline prices that had the most impact in June. Excluding gasoline prices, the headline inflation rate in June would have been 4%, down slightly from the 4.4% rate measured in May.
Grocery price inflation, which remained very high at 9.1%, and the sharp rise in mortgage interest costs (30.1% year-on-year) contributed the most to headline inflation in June.
Measures of core inflation (excluding more volatile priced items) which are the most tracked by the Bank of Canada to gauge inflationary pressures in the economy continued to hover between 3.5% and 4%, is still above the central bank’s targets.
Economists say these measures of even higher-than-desired core inflation at the Bank of Canada suggest that its fight against inflation through the highest interest rates in 20 years could still go downhill. increase over the coming quarters.
In its interest rate hike statement last week, the Bank of Canada said it expected the inflation rate to hover around 3% over the next year, before declining to the 2% target by mid-2025.
Ultimately, this process of so-called “restrictive” monetary policy aims to neutralize inflationary pressures in the economy while avoiding causing a recession.
Minister Freeland salutes the progress made in the fight against inflation without allowing herself to draw conclusions. “We are coming to the end of two years that have been very difficult,” she said, not wanting to speculate on the possibility that the inflation rate could stagnate above 2% until halfway through. year 2025 as predicted by many analysts. “I don’t have a crystal ball and I won’t make predictions or predictions,” she said.
“This deceleration in inflation is mainly attributable to the pullback in gasoline prices from their peaks seen in 2022. As well, the core inflation measures most watched by the Bank of Canada are proving even more higher than the target levels. Despite this decline in the inflation rate in June, we cannot rule out the possibility that interest rates will rise again at the start of the fall. »
“Inflation continued to make encouraging progress in June. In its recent statement on interest rates last week, the Bank of Canada expressed its concern about the persistence of inflationary pressures in the economy. June inflation data suggests things are moving in the right direction, but not fast enough for the Bank of Canada to lower its guard. »
“The inflation rate in June returned to the Bank of Canada’s target range – around 2% – after 26 months above it. In this context, one wonders if the central bank was right to lose patience with the lack of progress on the inflation front, and to resume its rate hike in June. After this inflation report, we continue to believe that this additional hike [in interest rates] was premature and even perilous for the economy. In fact, monetary policy in Canada is the tightest since 2008, and the tightest among the G7 countries. »
“The inflation rate is back within the Bank of Canada’s target range. However, core inflation measures most closely watched by the central bank indicate that inflationary pressures remain lingering in the economy. After raising interest rates twice in recent months, I believe the Bank of Canada will be more patient until the fall. »
Mortgage interest cost: 30.1%
Baked goods: 12.9%
Fresh fruit: 10.4%
Grocery store food: 9.1%
Dairy products: 7.4%
Car insurance premiums: 5.4%
Fuel oil price (diesel): – 31.5%
Automotive gasoline prices: -21.6%
Cell phone services: -14.7%
Child care and housekeeping services: -10.4%
Transportation Services: -3.4%
Internet access services: -3.2%