Ottawa | Reuters — Canada’s annual inflation rate rose to 1.9 per cent in June, meeting analysts’ expectations, as increases in the price of automobiles, clothing and footwear pushed the index higher, data showed on Tuesday.
The consumer price index was at 1.7 per cent in the prior month.
Statistics Canada said on a monthly basis the CPI increased 0.1 per cent, matching analysts’ forecasts.
CPI has been under two per cent, or the mid-point of the Bank of Canada’s inflation target range, for three consecutive months.
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This is the last major economic indicator to be released before the Bank of Canada’s rates decision later this month.
The slight rise in prices across many segments, along with a strong jobs number last week, is likely to take away any incentive to cut interest rates, economists said.
Money markets were betting on the odds for a rate cut at just over 10 per cent after the data was released. The central bank will announce its monetary policy decision on July 30.
“It’s just the latest piece of evidence to keep the Bank of Canada on hold after 83,000 jobs (added in June) and no clarity on how fiscal policy and trade policy will evolve,” said Derek Holt, vice president of Capital Market Economics at ScotiabankC.
The Canadian dollar was trading stronger by 0.19 per cent to 1.3677 against the U.S. dollar, or 73.12 U.S. cents. Yields on the government’s two-year bonds were down 0.6 basis points to 2.761 per cent.
The rise in prices in June was primarily led by a 2.7 per cent jump in durable goods such as automobiles and furniture, following a 2 per cent rise in May on a year-on-year basis, StatCan said.
Passenger vehicle prices rose 4.1 per cent on an annual basis in June following a 3.2 per cent increase in May, the agency added.
Inflation was further boosted by a rise in the price of clothing and footwear, which accelerated 2 per cent annually in June after a modest 0.5 per cent rise in May, due in part to uncertainty surrounding international trade, Statistics Canada said.
U.S. consumer prices also picked up in June, likely marking the start of a long-anticipated tariff-induced increase in inflation.
Canadian gasoline prices are expected to be depressed for the next 10 months after the government scrapped the consumer carbon levy on gasoline in April.
On a year-over-year basis gasoline prices fell by 13.4 per cent in June from 15.5 per cent in May.
Economists and the central bank have focused on the core measures of inflation, which excludes the impact of tax measures, to gauge price trends.
One of the core measures of inflation, the CPI-median, or the centermost component of the CPI basket, edged up to 3.1 per cent in June from 3.0 per cent in the prior month.
The other core measure CPI-trim, which excludes the most extreme price changes, was unchanged in June at 3.0 per cent from May, StatsCan said.
“The fact that core inflation is pretty much locked in at around three per cent is a bit of an issue for Bank of Canada rate cut prospects,” said Doug Porter, chief economist at BMO Capital Markets.
Shelter prices, which account for up to 30 per cent of the CPI basket weight and comprises mortgage and rent, rose by 2.9 per cent, the first drop below 3.0 per cent in more than four years.
