Headline inflation eased to 2.8 per cent year-over-year in June, down from 3.2 per cent in May, according to Statistics Canada. Consumer prices fell 0.4 per cent month-over-month — the largest monthly decline since December 2024 — while the seasonally adjusted decline was a more modest 0.1 per cent, marking the first monthly decrease since April 2025.
The moderation in headline inflation was largely driven by a 10.2 per cent month-over-month decline in gasoline prices, although prices at the pump remain 20.5 per cent higher than a year ago. Excluding gasoline, inflation held steady at 2.2 percent year-over-year. Grocery prices offered some relief, easing to 3.9 per cent year-over-year from 4.3 per cent in May, though food inflation has now outpaced headline CPI for 17 consecutive months. Meanwhile, shelter costs continued to cool, matching their slowest pace in more than five years at 1.5 per cent year-over-year, supported by stable mortgage interest costs and flat-to-lower home prices.
Partly offsetting this softness, World Cup-related demand pushed up travel costs. Traveller accommodation prices rose 10.1 per cent year-over-year, with host cities in Ontario and British Columbia recording increases of roughly 20 per cent. Rental vehicle prices, travel tours, and air transportation also posted stronger gains. These increases appear temporary and should partially reverse in the coming months.
Underlying price pressures continued to ease. The Bank of Canada’s preferred core measures, CPI-median and CPI-trim, fell to 1.9 per cent and 1.8 per cent year-over-year respectively — both falling below the Bank’s 2 per cent target for the first time since August 2020.
Implications for Bank of Canada Policy
June’s report reinforces the view that headline inflation has moved past its peak and that underlying price pressures are moderating amid a softer demand backdrop. With both core inflation measures now below the Bank’s 2 per cent target and price-pressure breadth narrowing (fewer CPI components experiencing elevated price growth), the data support the case for the Bank of Canada to remain on hold.
Some upside risks remain, particularly from elevated global oil prices and a modest rebound in gasoline costs in July. However, absent a fresh shock, we expect the Bank to remain on the sidelines through at least the remainder of the year, keeping its policy rate unchanged as it assesses whether the recent moderation in core inflation proves durable.
Housing Affordability Watch
CMI monitors the latest developments and offers insights on solutions to Canada’s housing affordability crisis
Institutional investors are often cited as a factor influencing housing affordability, but how large is their role in Canada’s housing market?
Our latest Housing Affordability Watch examines new Statistics Canada research on individual and institutional investors, including where institutional ownership is most concentrated, their role in rental housing, and why the findings suggest a more nuanced picture.
Read the full analysis: Individual and Institutional Investors in the Canadian Housing Market
Independent Opinion
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any person or organization in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. Any opinions, projections, or forward-looking statements expressed herein are solely those of the author. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice including investment advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication. Readers are cautioned to always seek independent professional advice from a qualified professional before making any investment decisions.
