Statistics Canada reported on Tuesday morning that the Consumer Price Index (CPI) rose by 1.7% year over year in May, matching the increase observed in April.
However, excluding energy, inflation decreased to 2.7% in May, after reaching a 13-month high of 2.9% in April.
The federal agency notes that this slowdown in inflation in May is mainly attributable to the housing component, which carries the largest weight in the CPI. Rent price growth slowed, particularly in Ontario, where there is increased availability of rental housing. In addition, growth in the mortgage interest cost index continued to decelerate for a 21st consecutive month in May.
Implications
And a slight easing of inflationary pressures is, in principle, good news for the conduct of the Bank of Canada’s monetary policy. However, it is far too early to be optimistic about a potential cut to the key interest rate on July 30.
Inflation could rebound in June due to tariffs and counter-tariffs, and especially because of rising oil prices linked to the Israeli-Iranian war.