Inflation Goes Down From 4.1% to 2.8%

The rise in consumer prices decelerated again in June, but costs for shelter and food are still putting a strain on Canadian's wallets, evidence that bringing inflation down to target remains a tricky balancing act for the Bank of Canada.

The consumer price index (CPI) was up 2.8% last month, Statistics Canada reported on July 18, falling a couple of ticks below the 3% increase economists surveyed by Bloomberg had expected. That was down from 3.4% in May and marked the first time the inflation rate has fallen within the Central Bank’s target control range of 1 to 3% since March 2021.

The decline was driven by a 21% drop in gasoline prices for the month, which was largely the result of base-year effects; last year, prices at the pump shot up amid increasing global demand for crude oil.

In June 2022, inflation hit its peak above 8% and has come down as the Central Bank hiked interest rates at almost every policy meeting since March of last year — taking a brief pause in March and April of this year.

“Inflation has fallen into the Bank of Canada’s target range, but there are signs pointing to slower progress from this point on,” Royce Mendes, economist and managing director at Desjardins Capital Markets, wrote to clients in a note on July 18th.

Discounting gasoline, the headline inflation figure would have been 4% in June, down from 4.4% in May. Statistics Canada said elevated grocery prices, up 9.1%, and mortgage interest costs, up 30.1%, contributed the most to the overall increase of 2.8%.

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