Canada’s annual inflation rate reached 7.7% in May, its highest level since January 1983 and
above economist expectations for a 7.3% annualized increase.
May’s year-over-year inflation reading was up from 6.8% in April, according to Statistics
Canada. Inflation rose 1.4% on a monthly basis between April and May, with gasoline and car
prices among the biggest contributors to the increase in Canadian consumer prices.
Core inflation, which excludes volatile food and energy prices, rose to 5.2% from a year ago, its
highest level in 30 years. Like other nations around the world, Canadian households are
grappling with record gasoline prices and food costs.
Markets are now fully pricing in a 75-basis-point interest rate hike by the Bank of Canada at its
next meeting in July, which would bring its trendsetting rate to 2.25%. The central bank’s key
lending rate is forecast to reach 3.50% by the end of this year.
Gasoline prices in Canada rose sharply in May, increasing 12% during the month and gaining
48% from a year earlier. Food costs rose a smaller 0.8% last month but are up 8.8% from a year
ago.
Statistics Canada noted that the cost of living is increasing at twice the average wage gains in
the country, putting additional pressure on the economy.
