Canada’s inflation rate rose to 8.1% in June, its highest level since January 1983.
According to Statistics Canada, the Consumer Price Index (CPI) increased to 8.1% from a year
earlier and climbed 0.7% from May of this year.
Both numbers were lower than expected, with economists forecasting annualized growth of
8.4% and 0.9% on a month-over-month basis, according to Refinitiv data.
However, an annual inflation reading above 8% is likely to keep the Bank of Canada raising
interest rates in the near-term to cool off overheated consumer prices.
Higher gasoline prices were a key factor in June’s inflation reading, with prices rising 6.2% from
May and 55% higher than a year ago.
However, food and shelter costs appear to be slowing down. Prices for food were up 0.1% from
May to June, the slowest growth rate in a year. Shelter costs grew 0.4%, the smallest increase
since November 2021.
Core inflation, which removes volatile food and energy prices, rose to 5% in June from a year
ago, which is a record for the measure that started being recorded in 1990.
The Bank of Canada had forecast that June inflation would top 8% and sees inflation staying at
its current level or higher through the end of the current third quarter before starting to fall.
Traders are pricing in a 75-basis point interest rate increase when the Bank of Canada next
meets in September, following a full percentage point increase on July 13.