According to Statistics Canada, Canada’s inflation rate decelerated to 3.4 percent in the year leading up to May, marking a significant decline primarily driven by lower gasoline prices.
This slowdown represents a notable decrease from the 4.4 percent pace observed in April.
The drop in gasoline prices played a major role in this deceleration. When excluding the impact of gasoline, the inflation rate would be 4.4 percent.
Compared to the record highs experienced at this time last year, gasoline prices have decreased by over 18 percent, exerting downward pressure on the overall inflation rate.
However, beneath this headline slowdown in consumer prices, several aspects of the cost of living continue to rise at a concerning rate.
Grocery prices surged by almost nine percent, only slightly lower than the 9.1 percent increase recorded in April, and nearly three times the inflation rate.
Food prices have been consistently rising at a faster pace than the official inflation rate for over a year.
Furthermore, the cost of housing continues its upward trajectory. The mortgage interest cost index rose by 29.9 percent, marking the highest rate of increase on record. This surge is attributed to variable-rate mortgage holders facing higher interest rates and fixed-rate loans renewing at significantly elevated rates compared to previous terms.
Rent prices also climbed by 5.6 percent in the past year, while overall shelter costs rose at a 4.7 percent pace.
Leslie Preston, an economist at TD Bank, highlighted that if volatile factors such as gasoline and mortgage rates are excluded, underlying inflation still remains elevated, potentially warranting the Bank of Canada to consider at least one more rate hike in the future.
“While the slowdown in goods inflation is positive, the Bank of Canada likely anticipated this improvement as supply chain disruptions eased,” she stated. “Although Canadian inflation cooled down in May, it is unlikely to be sufficient progress to deter the Bank of Canada from raising rates in July.”
