Canada's annual inflation rate accelerated to 3.0% in June, up from 2.9% in May, driven primarily by higher gasoline prices, Statistics Canada reported on Tuesday.
The increase exceeded market expectations of 2.9% and marked the first time inflation has risen above the Bank of Canada's 2% target since June 2023. On a monthly basis, consumer prices rose 0.1% from May to June, matching the prior month's gain.
Gasoline prices surged 12.4% year-over-year, contributing significantly to the headline inflation figure. Excluding gasoline, the annual inflation rate was 2.6%, up from 2.5% in May. The Bank of Canada's core inflation measures, which strip out volatile components, also showed upward momentum. CPI-trim increased to 3.2% from 3.1%, while CPI-median rose to 2.9% from 2.8%.
The data complicates the central bank's policy outlook, as policymakers weigh the need to balance inflation control with economic growth. The Bank of Canada has maintained its benchmark interest rate at 5% since July 2023, citing concerns over persistent price pressures. Economists noted that while energy prices were the primary driver, broader price pressures remain elevated.
The Canadian dollar showed little immediate reaction to the report, trading marginally higher against the U.S. dollar. Investors will closely monitor the Bank of Canada's next policy decision, scheduled for July 24, for signals on potential rate adjustments.
