Canada’s annual inflation rate held steady at 1.7 per cent in May, thanks largely to cooling shelter costs and falling prices on travel and fuel, Statistics Canada reported Tuesday. The pace of rent increases slowed notably, especially in Ontario, where a combination of slower population growth and a surge in new housing supply helped ease pressure on tenants.
Shelter costs rose 3 per cent year-over-year in May, down from 3.4 per cent in April. Mortgage interest costs also continued their long deceleration, dropping for the 21st straight month as lower interest rates from the Bank of Canada took hold.
Economists had anticipated that the inflation rate would remain unchanged, and the data aligned with those expectations. Although gas prices are down compared to a year ago — largely due to the federal carbon tax removal — the month-over-month dip at the pumps was less pronounced than last year, limiting the impact.
Food prices also showed signs of moderation, with grocery store costs rising 3.3 per cent annually in May, down from 3.8 per cent in April. Meanwhile, lower prices on travel tours and airfares helped dampen overall inflation pressures.
One of the standout increases came from the auto sector, where the cost of a new vehicle climbed 4.9 per cent year-over-year, a jump driven largely by higher prices for electric vehicles.
When inflation is measured excluding tax changes such as the carbon tax cut, the rate remained steady at 2.3 per cent, a metric the Bank of Canada is monitoring closely to gauge underlying inflation trends.
The central bank’s preferred core inflation indicators edged down to 3 per cent in May, a slight improvement as policymakers weigh their next steps. Bank of Canada Governor Tiff Macklem has emphasized that the central bank is looking beyond temporary distortions like tax changes or tariffs to better understand the true path of inflation.
All eyes will now turn to the Bank of Canada’s next interest rate decision, scheduled for July 30.