Canada’s annual inflation rate unexpectedly accelerated to 2.9% in May, largely due to rising service prices. Analysts interviewed by Reuters they estimated inflation would cool to 2.6% from 2.7% in April. Month on month the figure, measured by the consumer price index, increased by 0.6%, also exceeding the forecasts of an increase of 0.3%.
Food price growth accelerated in May for the first time since June 2023, marking growth of 22.5% compared to May 2020. Annual energy price inflation slowed to 4.1% from 4 .5% in April. Excluding volatile foods and energy, prices rose 2.9% compared to April’s 2.7% increase. Overall, service prices increased by 4.6% in May after 4.2% in April, while goods inflation remained at 1%.
Headline inflation is in line with the Bank of Canada’s forecast of 2.9% by the end of the first half of 2024. The bank will have another month of inflation data before its next rate announcement on July 24 , when money markets see a nearly 70% chance of a rate cut.
Recall that in June he cut rates for the first time in four years by 25 basis points, bringing it to 4.75%, and declaring that further easing is likely if inflation continues to decline.
PHOTO: SHUTTERSTOCK
