Inflation in Canada picked up speed again in June, though the gain missed forecasts, with prices rising at their fastest pace since January 1983 driven by higher costs at the gas pump and almost everywhere else, official data showed on Wednesday.
Canada’s annual inflation rate hit 8.1% in June, short of forecasts it would accelerate to 8.4%, but up from 7.7% in May, Statistics Canada data showed. On a monthly basis, prices were up 0.7%, a less blistering gain than 1.4% in May.
“For one of the rare times in the last two years, we’ve actually got a number that’s below expectations,” said Doug Porter, chief economist at BMO Capital Markets. “The bad news is we still got the highest inflation in roughly forty years.”
Driving the June gain were lofty gasoline prices, up 54.6% in June compared with a 48.0% gain in May, though Statscan noted “price increases remained broad-based with seven of eight major components rising by 3% or more.”
Indeed, all three core measures of inflation, which the Bank of Canada watches carefully, rose in June. CPI Common, which the central bank says is the best gauge of the economy’s performance, hit 4.6% from a upwardly revised 4.5% in May.
“That shows that probably we’re going to keep getting some sticky inflation prints to come in the next couple of months,” said Jay Zhao-Murray, a market analyst at Monex Canada.
“I think the key takeaway from this is it doesn’t really say too much about the Bank of Canada. Because it was a hot print,” he added.
The Bank of Canada last week revised up its inflation forecasts and said it expected price increases to be around 8% for the next few months. It also hiked its policy interest rate by 100 basis points, in a rare move aimed at fending off a price spiral.
Inflation has been above the central bank’s 2% target since March 2021, with prices of everyday essentials pinching consumers. Money markets are betting on another three rate hikes before the end of the year, to get the policy rate to 3.5%.
The Canadian dollar was trading at 1.2890 to the Greenback, or 77.58 U.S. cents.
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