Canadian inflation rises to 1.9% in June, signaling no rate cut by Bank of Canada

Canada’s annual inflation rate increased to 1.9% in June, with core measures of inflation remaining strong. This reinforces expectations that the Bank of Canada will not cut interest rates this month. The elimination of the consumer carbon price is expected to impact headline inflation figures over the next 10 months, making core measures crucial for assessing price pressures in the economy.

Statistics Canada reported that the annual rate rose from 1.7% in May, aligning with forecasts. The Bank of Canada’s core inflation measures, which exclude volatile price changes, continued to hover around 3%, indicating persistent price pressures.

BMO chief economist Douglas Porter noted that despite economic weakening, inflation remains steady due to shelter costs and trade war pressures affecting durable goods and groceries. Passenger vehicle prices rose by 4.1% year-over-year in June, while clothing and footwear prices increased to 2%. Grocery prices saw a slower pace of increase at 2.8% compared to May’s 3.3%.

The Bank of Canada has maintained a cautious stance on monetary policy amid trade tensions with the U.S. Governor Tiff Macklem hinted at readiness to cut interest rates if needed but has not done so yet. The upcoming interest rate announcement on July 30 will consider the latest inflation data and the positive June job report, which saw a drop in the unemployment rate to 6.9% with the addition of 83,000 jobs.

According to the source: The Globe and Mail.