Canada’s annual inflation rate declined to 3.4% in May from 4.4% in April.
The May inflation reading represents the smallest increase in consumer prices in Canada since June 2021.
The slowdown was largely driven by lower prices for gasoline, which declined 18.3% in May from a year earlier.
Removing the impact of lower gasoline prices, inflation in Canada during May came in at an annualized 4.4%, down from 4.9% in April of this year.
The biggest contributor to Canada’s May inflation rate was interest charged on home mortgages, which increased 30% from a year ago.
Excluding mortgage interest costs, inflation in Canada rose 2.5% in May compared to a gain of 3.7% in April.
The Bank of Canada targets inflation at an annualized rate of 2% and has been raising interest rates aggressively to bring consumer prices back down to its goal.
On a monthly basis, the Consumer Price Index (CPI) rose 0.4% in May, following a 0.7% increase in April.
On a seasonally adjusted monthly basis, inflation in Canada grew only 0.1%.
Energy prices in Canada declined 12.4% in May from a year ago when supply uncertainty caused by Russia's invasion of Ukraine led to a spike in energy costs.
The Bank of Canada last raised interest rates on June 7 of this year, taking its trendsetting overnight rate to 4.75%, the highest level in 22 years.
Higher interest rates have led to increased borrowing costs for Canadian consumers, with the average interest charged on mortgages now well above 6%.
Prices for motor vehicles and cell phone service declined in May, according to Statistics Canada. However, grocery prices remain elevated.
Specifically, grocery prices rose 9% year-over-year in May, nearly unchanged from a 9.1% increase in April, said Statistics Canada.
The Bank of Canada is next scheduled to make a decision regarding interest rates on July 12.
Related Stories
