Statistics Canada reported today that the Consumer Price Index (CPI) in June rose 1.9% year-on-year, up from 1.7% in May.
This growth is roughly consistent with expectations and is largely due to smaller year-on-year declines in gasoline prices and higher prices for durable goods, including cars and furniture.
Although title inflation remains below the 2% target of Bank of Canada, the key measures of core inflation remain sticky.
The preferred core indicators of Canadian banks (CPI-TRIM and CPI-MEDIAN) were 3.0% and 3.1%, respectively, with medians slightly rising from 3.0% in May. The CPIX index excludes eight of the most volatile components and indirect taxes, accelerating from 2.5% in May to 2.7%.
“Today’s results have given Canadian banks little reason to prove the tax cuts in July,” wrote Douglas Porter, chief economist at BMO, in a note. “If a solid job report is the icing on the cake, it’s the top of the cherry. In short, basic inflation remains stubbornly strong.”
Prices of commodities such as vehicles, furniture and clothing led to a rise in inflation in June, with durable commodities inflation as high as 2.7% as vehicle prices rose in the first year of earnings in second-hand models within 18 months.
Meanwhile, grocery inflation dropped slightly to 2.8%, despite sharp rises in certain categories, such as coffee, prices rose by 23.2%.
Housing costs continue to dominate inflation
Housing inflation was 2.9% year-on-year, but rent and mortgage interest costs remain the biggest contributors to inflation.
“Rent is actually 4.7% of y/y, which is the biggest contributor to inflation over the past year,” Porter said. “The interest cost of mortgage loans continues to drop, but it’s still 5.6%/y of meat.”
CIBC economist Ali Jaffery said the rise in rents was “anecdotal evidence facing the cooling of the rental market, especially in Ontario,” but noted that the series has become “notorious” because Statcan modified its pre-pandemic approach.
Outlook: More waiting
Even if title inflation still hovers around Canadian bank comfort zones, economists say that sustained high core readings could keep the slowdown going
“As trade policy uncertainty remains close to its all-time highs and core price pressures, it may put the BOC under potential inflationary pressure with confidence, we hope it will continue to stabilize the overnight rate at 2.75% on July 30,” Oxford Economics said in a research note.
CIBC responded to this view, noting: “We want the bank to stay in July because it is a central bank and its own recognition is not very comfortable forward-looking.”
Unless the economy shows more compelling progress towards worsening or inflation, economists say the cuts in September are still on the table, although that will depend heavily on data between the time.
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Ali Jaffery Bank of Canada BOC core inflation CPI inflation Douglas Porter Economic data Inflation Oxford Economics lower forecast
Last modified: July 15, 2025
