Canada Inflation Research Brief

Inflation at its lowest since June 2021. Canada’s consumer price index rose 3.4 per cent year-over-year in May, down from the unexpected 4.4 per cent uptick witnessed in April. This was largely driven by the lower price of gasoline, which fell 18.3 per cent annually. Favourable base effects played a large role in this gasoline price decline as the onset of the Russian-Ukraine war caused energy prices to spike substantially in the first half of last year. On the flip side, for the third consecutive month, mortgage interest costs continued to be the largest contributor to annual price gains, up roughly 30 per cent year-over-year. When excluding these costs, inflation rose 2.5 per cent, which is within the Bank of Canada’s target range. While this significant slowdown in annual price growth is promising for commercial real estate investors, a further rate hike remains a possibility in July as the economy continues to remain resilient despite higher borrowing costs.