Canada Inflation Research Brief

Inflation defies consensus with slight uptick. Inflation jumped to 2.9 per cent in May, up from a 2.7 per cent reading in April and above the consensus estimate of 2.6 per cent. This rise in headline inflation was largely due to higher prices for services, which rose 4.6 per cent in May. The Bank of Canada’s preferred measures of core inflation, CPI-median and CPI-trim, also reaccelerated to 2.8 per cent and 2.9 per cent, respectively. This equated to a 0.3 per cent month-over-month gain in core inflation, above the 0.1 per cent measure seen over the first three months of the year. With the Bank of Canada recently lowering its overnight rate for the first time in over four years, this jump in inflation is an unfavourable outcome and could slow the pace in which additional cuts materialize. Nevertheless, inflation remains in the BoC’s target range and further reductions in the policy rate are expected, supporting commercial real estate space demand and investment over the course of 2025.