Canada Inflation Research Brief

Inflation eases, but pressures too high for comfort. Canada’s headline inflation rate held at 1.7 per cent in May. While there were concerns that tariffs and countermeasures would raise prices, the removal of the consumer carbon tax has pulled the cost of gasoline down, keeping the headline rate below target. Meanwhile, both core inflation measures – CPI-median and CPI-trim – eased to 3.0 per cent. A smaller 0.21 per cent monthly rise on average for these core indicators also brought the three-month annualized rate down to 3.0 per cent. At the same time, past interest rate cuts have eased mortgage costs, helping to keep shelter inflation at 3.0 per cent. Nevertheless, despite some positive signs, underlying price pressures are elevated and with only early indicators of tariff implications pulling through into hard data, the Bank of Canada remains in an uncertain position.