Canada’s Inflation Rate Remains Below Central Bank Target At 1.9%

Canada’s inflation rate came in at an annualized 1.9% in June, which is below the 2% target set by the country’s central bank.

The Consumer Price Index (CPI) rose 1.9% on a year-over-year basis in June, up from a 1.7% increase in May but still below the Bank of Canada’s 2% goal.

Much of the muted inflation is due to a sharp decline in gasoline prices, which fell 13.4% in June following a 15.5% decline in May of this year.

The steep drop in gas prices across Canada comes after the federal government in Ottawa removed consumer carbon pricing in April of this year, effectively eliminating a tax at the pumps.

Excluding the impacts of energy prices, inflation in Canada rose 2.7% year-over-year in June as prices for durable goods such as motor vehicles and furniture accelerated.

Still, the benign inflation growth provides leeway for the Bank of Canada to lower interest rates at its next policy meeting scheduled for July 30.

The central bank has already delivered two interest rate cuts in 2025, taking its benchmark overnight rate down to its current level of 2.75%.

Many analysts expect a further 25-basis point rate reduction from the Bank of Canada at the end of July.

Also exerting downward pressure on consumer prices in June was food purchased from stores, which rose 2.8% year-over-year during the month following a 3.3% advance in May.

The slower growth in grocery prices was largely due to fresh vegetables, which declined 3.1% year-over-year in June.

Shelter costs across Canada rose 2.9% in June from the same month in 2024, which was a continued deceleration from the double-digit increases seen in recent years.

On a monthly basis, inflation in Canada rose 0.1% in June, said Statistics Canada, which released the data.