Canada's Inflation Eases in June: A Closer Look at Key Economic Trends and Potential Impacts

Canada's annual inflation rate eased to 2.7% in June, down from 2.9% in May, driven mainly by a slowdown in gas price increases. This reduction in inflation could potentially clear the way for another Bank of Canada interest rate cut.

Gas prices saw a modest rise of 0.4% year-over-year in June compared to a 5.6% increase in May. Excluding gasoline, inflation would have been 2.8%.

Other areas showing reduced price growth included shelter inflation, which rose by 6.2% year-over-year, down from 6.4% in May, and transportation, which slowed to 2% from 3.5% in May. However, rent inflation remained high at 8.8%, and mortgage interest costs rose significantly by 22.3%.

The price of durable goods declined by 1.8% year-over-year, with passenger vehicle sales seeing the largest drop since February 2015. Despite these improvements, the price of services continued to rise, reaching 4.8% in June, up from 4.6% in May.

Food costs also increased, with store-bought food prices rising by 2.1% year-over-year in June, compared to 1.5% in May. Over the past three years, store-bought food prices have risen by 21.9%, though the overall inflation in this category has been decreasing since January 2023.
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Economists suggest that persistent pressure in certain areas, such as rent and mortgage interest costs, is due to high demand and limited supply.

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