Canada’s annual inflation rate slowed more than expected to 2.8% in June from 3.2% in May, while the headline CPI fell -0.4% month-on-month, marking the largest monthly decline since December 2024. The moderation was primarily driven by gasoline prices, which remained higher than a year earlier but rose at a much slower annual pace than in May as lower oil prices during June weighed on fuel prices. Gasoline prices fell by -10.2% month-on-month, helping to lower headline inflation despite continuing geopolitical tensions in the Middle East.
Core inflation also declined. The average CPI fell to 1.9% year-on-year from 2.1%, while the CPI slowed to 1.8% from 2.0%, both below market expectations. The combined CPI fell to 2.6% from 2.7%, although it remained slightly above expectations. Excluding gasoline, the headline CPI was unchanged at 2.2% year-on-year, suggesting that broader price pressures remained relatively contained even as energy prices continued to exert a significant influence on the headline figure.
The report should reinforce expectations that the Bank of Canada is able to maintain a patient approach to policy. While geopolitical risks continue to cloud inflation expectations in energy markets, June data suggests that the previous oil-driven price rise did not generate broader second-round inflation pressures. With headline and core inflation measures moving lower, policymakers will likely remain focused on whether easing energy prices can continue to offset the risk of renewed volatility if tensions in the Middle East escalate again.
Economic data
| index | actual | expected | former |
|---|---|---|---|
| CPI M/M | -0.4% | -0.2% | 1.0% |
| Consumer Price Index Y/Y | 2.8% | 2.9% | 3.2% |
| Average CPI Y/Y | 1.9% | 2.1% | 2.1% |
| The CPI fell year-over-year | 1.8% | 2.0% | 2.0% |
| Joint CPI Y/Y | 2.6% | 2.5% | 2.7% |
Ready meals in the market
- Headline inflation slowed more than expected, supported by the sharp decline in gasoline prices during June.
- The monthly CPI recorded its largest decline since December 2024, suggesting that easing energy price pressures are outpacing gains elsewhere.
- Both the average CPI and CPI were below expectations, which reinforced the moderation in core inflation.
- Excluding gasoline, inflation remained steady at 2.2%, suggesting that broader price pressures remain relatively under control.
- The report supports the Bank of Canada’s patient stance, although inflation expectations remain sensitive to renewed volatility in global oil prices.
