Inflation shows its stubborn side with bump in May
The increase came as a surprise for many economists who are watching for the Consumer Price Index to return to the 2% target, which the Bank of Canada considers to be sustainable inflation.
Statistics Canada said May’s increase was caused by higher prices for services, specifically cellular services, rent and air fares.
“The increase in services inflation is not helpful, especially as wage growth is elevated. The risk of a strong rebound in the housing market hasn’t materialized yet, but slowing shelter inflation is welcome news,” Canadian Chamber Senior Economist Andrew DiCapua said. “Our consumer spending tracker is showing growth presenting a risk that demand is more robust. Odds of a cut in July are lower and still depend on whether the economy is weaker than the Bank’s recent forecast. Governing Council continues to be heavily data dependent, and this reversal will support their restrictive bias. The Bank will want to take a slow and measured approach, especially with inflation accelerating.”
The Consumer Price Index for June will be released on July 16, ahead of the next interest rate decision on July 24.
