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Canada’s Inflation Surge Continues, Boosting Expectations for Big Rate Rise

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OTTAWA—Annual inflation in Canada accelerated in May toward 8%, reaching a nearly four-decade high and all but locking in market expectations that the country’s central bank will raise its policy interest rate by three quarters of a percentage point in July.Economists expect inflation in Canada to surpass 8% when June data are released, and possibly stay above 7% for the bulk of 2022.

The need for aggressive Bank of Canada rate increases to tame inflation has prompted analysts to predict a sharp slowdown in economic growth starting in the second half of this year, and to warn of heightened risks of a recession.

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