Canada Inflation Research Brief

Annual price growth back on downward trend. Inflation hit 2.7 per cent in June — marking the sixth consecutive month within the central bank’s target range — and down from the surprise uptick of 2.9 per cent in May. The deceleration was largely due to slower year-over-year growth in gasoline prices as well as a 1.8 per cent drop in the cost of durable goods, an indication that elevated interest rates continued to rein in spending. While the Bank of Canada’s preferred measures of core inflation saw its three-month annualized change increase to 2.9 per cent, year-over-year measures were promising, with CPI-trim holding stable at 2.9 per cent and CPI-median falling to 2.6 per cent. With inflation falling by more than the consensus estimate of 2.8 per cent, a second consecutive interest rate cut in July is now the most likely outcome.