Canada’s inflation rate falls to 3.4 per cent last month, lowest rate since June 2021

OTTAWA –

Canada’s inflation fee fell to three.4 per cent in May — the bottom it has been since June 2021.

The decline is probably going welcome news for the Bank of Canada, which is gearing up for its subsequent rate of interest determination on July 12 after elevating a quarter-percentage level to 4.75 per cent earlier this month.

Statistics Canada reported Tuesday the slowdown was largely as a result of decrease gasoline costs in comparison with a 12 months in the past.

However, the long-awaited decline in meals inflation has but to return by in Canada. Grocery costs have been up 9 per cent on an annual foundation, exhibiting little enchancment from April.

Meanwhile, the slowdown within the headline fee comes after inflation ticked up in April to 4.4 per cent, marking a slight reversal of the progress made since final summer season.

The Bank of Canada justified its most up-to-date fee hike partially by pointing to the slight rise in inflation in April. It’s anticipated to make its subsequent rate of interest determination based mostly on incoming financial knowledge, together with Tuesday’s inflation report.

The central financial institution shall be paying specific consideration to its core measures of inflation, which strip out volatility. Those measures additionally declined final month.

Forecasters and the central financial institution have been anticipating inflation to fall significantly this 12 months to about three per cent this summer season. That’s due to what economists name base-year results, whereby worth actions a 12 months in the past have an effect on the calculation of the inflation fee.

Given the speedy run-up in costs that occurred within the first half of 2022 after the Russian invasion of Ukraine, the tempo of inflation is slower right now as a result of costs are being in comparison with these elevated ranges.

This report by The Canadian Press was first printed June 27, 2023.