Canada Inflation Slows to 2.8% in June as Fuel Prices Ease

Canada’s annual inflation rate slowed to 2.8% in June, down from 3.2% in May, as lower gasoline prices helped ease cost pressures across the economy, according to data released by Statistics Canada.

The reading came in slightly below market expectations of 2.9% and marked a moderation after inflation reached its highest level in more than two years the previous month.

The slowdown was largely driven by softer fuel inflation. Gasoline prices increased 20.5% year over year, easing from the 33.2% annual rise recorded in May. The moderation followed a temporary recovery in energy exports from the Middle East, which contributed to lower wholesale fuel prices.

As a result, transportation inflation slowed to 6.7%, compared with 9.0% in the previous month.

Food inflation also moderated, with prices rising 3.5% annually, down from 3.8% in May, reflecting slower price increases at grocery stores.

The Bank of Canada’s preferred measures of underlying inflation also continued to soften. The median core inflation rate declined to 1.9% from 2.1%, while the trimmed mean slowed to 1.8% from 2.0%. Both indicators reached their lowest levels in more than five years, suggesting that underlying price pressures continued to ease.

Other categories also showed slower inflation. Shelter costs increased 1.5%, down from 1.7% in May, while inflation for health and personal care eased to 2.5% from 2.7%. Prices for household operations, furnishings, and equipment remained in negative territory, declining 0.2% from a year earlier.

On a monthly basis, Canada’s Consumer Price Index (CPI) fell 0.4% in June, largely reflecting a 10.2% decline in gasoline prices compared with May.

The latest inflation data may reinforce expectations that price growth is moving closer to the Bank of Canada’s target range, although policymakers are expected to continue monitoring the impact of energy prices and broader global economic conditions on future inflation trends.