Canada’s Inflation Cools to 2.8% in June as Gas Prices Ease, Though Grocery Costs Still Outpace Headline Rate

Canadians got a bit of a break at the pump last month, and it showed up in the country’s latest inflation numbers. Statistics Canada reported Monday that the Consumer Price Index climbed 2.8 per cent year-over-year in June, a noticeable slowdown from May’s 3.2 per cent reading.

The main driver behind the dip was falling gasoline prices. Fuel costs had spiked through the spring as conflict in the Middle East rattled global oil markets, but a fragile ceasefire between the U.S. and Iran eased some of that pressure through June. That relief may be short-lived, though StatCan noted that renewed fighting between the two countries has already started pushing pump prices back up in recent weeks.

Strip gasoline out of the calculation, and the picture looks steadier: core inflation held flat at 2.2 per cent between May and June.

Food shoppers caught a small break too. Grocery prices rose 3.9 per cent annually in June, down from 4.3 per cent the month before. Still, that marks 17 consecutive months where grocery inflation has outpaced the overall CPI a streak that continues to squeeze household budgets even as the headline number improves.

Within the grocery aisle, the trends were mixed. Fresh fruit got cheaper, largely thanks to falling grape prices, but that saving was offset by steeper price increases for fresh and frozen chicken, certain baked goods, and frozen food items.

Hosting FIFA World Cup matches in Toronto and Vancouver left its mark on the numbers as well. Demand for hotel rooms and rental cars surged in both cities, with accommodation prices in Ontario and British Columbia jumping roughly 20 per cent compared to a year earlier.

Air travel wasn’t spared either. Airfare costs rose 9.6 per cent year-over-year the sharpest increase in more than three years which Statistics Canada attributed to a combination of rising jet fuel prices and stronger demand for domestic flights.

The fresh inflation data comes on the heels of the Bank of Canada’s decision last week to leave its key interest rate unchanged at 2.25 per cent for a sixth consecutive meeting. The central bank is aiming to keep annual inflation within its target band of one to three per cent.

Policymakers also indicated they’re not yet seeing signs that the earlier spike in oil prices tied to the Iran conflict is bleeding into broader price pressures across the economy a cautiously optimistic signal, even as geopolitical tensions threaten to reignite costs at the pump in the weeks ahead.