Inflation cools ahead of Bank of Canada rate decision
Canada’s annual inflation rate slowed to 2.7 per cent in June from 2.9 per cent a month earlier, a softening that removes at least one obstacle to another potential Bank of Canada interest rate cut next week.
The month-over-month easing in inflation was largely the result of gas prices, which were up just 0.4 per cent year-over-year in June compared to a 5.6 per cent increase in May. Excluding gasoline, inflation would have decelerated to 2.8 per cent.
Other components with slowing price growth in June included shelter inflation, which rose by 6.2 per cent year-over-year, down from 6.4 per cent in May, and transportation, which decelerated in June to two per cent year-over-year, down from 3.5 per cent in May.
On the other side of the equation, factors that maintained the pressure on prices included rent inflation, which remained high at 8.8 per cent year-over-year and mortgage interest costs, which rose by 22.3 per cent.
“These are parts of the basket I think that we’re really seeing pressure that is persisting,” said Dawn Desjardins, senior economist with Deloitte. “I think it’s a demand story with a lack of supply, so that is actually keeping those elements hotter than expected.”
The price of durable goods declined year-over-year by 1.8 per cent, driven by the largest decline in passenger vehicle sales since February of 2015. However, despite continued improvements in the price of goods, growth in the price of services remained elevated at 4.8 per cent year-over-year in June, up from 4.6 per cent in May.
Another sticky point was the cost of food bought at stores, which rose year-over-year by 2.1 per cent in June, up from 1.5 per cent in May. Over the past three years, the price of food purchased in stores has risen by
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