Inflation falls below 3% in June
But will it be enough for the Bank of Canada to press pause on interest rate hikes?
By Rob Roach, ATB Economics 18 July 2023 1 min read
The national inflation rate slowed to 2.8% in June, down from 3.4% in May.
This is the first time year-over-year (y/y) growth in the Canadian Consumer Price Index (CPI) has been below 3% since March 2021. It peaked at 8.1% in June 2022.
The cost of energy continues to be a key factor with prices this June below the spikes experienced during the early months of the Russian invasion of Ukraine.
Excluding gasoline from the CPI basket, the inflation rate was 4.0% in June compared to 4.4% in May.
Overall energy prices were down by 14.6% compared to 12 months earlier.
Food continued to get more expensive with y/y prices up by 8.3%, but the month-over-month increase slowed to 0.1%.
Mortgage interest costs, however, broke a new record for y/y growth, jumping by 30.1%.
In Alberta, headline inflation slowed to 1.9%, down from 3.1% in May and its lowest reading since February 2021. Prince Edward Island had the lowest rate at just 0.2% price growth.
As with the national rate, lower gasoline prices were a key factor. Alberta’s inflation rate was 3.3% in June excluding gasoline compared to 3.9% in May. While food price inflation in Alberta remained elevated at 7.9%, the rate eased from May’s 8.3% reading. Shelter costs in Alberta also rose at a slightly lower rate of 4.6% versus 5.1% in May.
In terms of how the Bank of Canada will interpret the June inflation numbers, all three of the Bank’s preferred core measures of price growth (CPI-trim, CPI-common, CPI-median) edged down slightly year-over-year, but remained stubbornly high.
While the downward trend in headline CPI inflation is encouraging, much of the improvement was anticipated due to base-year energy effects. Last week, the Bank signaled a continuation of its “data dependent” approach and has many other economic indicators to consider (including another CPI report) between now and its next rate decision on September 6th.
Answer to the previous trivia question: Built in 1891, the Strathcona Hotel is the oldest building in Edmonton’s Old Strathcona neighbourhood.
Today’s trivia question: Which movie—after adjusting for ticket price inflation—holds the record for the highest box office gross?