Canada’s consumer price index for June landed at 2.8 per cent on a year-over-year basis—down from 3.2 per cent in May—thanks to lower gasoline and energy prices. On a monthly basis, headline inflation fell by 0.4 per cent.
More importantly, core inflation measures all fell below 2 per cent for the first time since early 2021, with weighted median and trimmed mean falling to 1.9 per cent and 1.8 per cent respectively.
This marks a firm return to price stability.
We expect the CPI headline number to not rise above 3 per cent in the coming months, with the core measures squarely at or below target.
In this scenario, we believe the Bank of Canada will hold its key interest rate at 2.25 per cent for the remainder of 2026 with a relatively accommodative stance to allow economic recovery—especially since core inflation has now fallen below 2 per cent.
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July’s inflation will likely come in near 3 per cent. While energy and gasoline prices have gone up since June, prices for travel-related services might decelerate as the World Cup-related hikes fade.
Shelter prices look to be stabilizing, which suggests that inflation will not increase further.
Of course, uncertainty persists regarding energy prices due to the geopolitical situation in the Middle East—but the big picture is that the spike in inflation has peaked and likely passed.
What the data shows
On a seasonally adjusted basis, Canada’s CPI fell 0.1 per cent in June.
Gas prices led the decline as they fell by 10.2 per cent on a month-over-month basis; they also increased by 20.5 per cent on a year-over-year basis, down from 33.2 per cent in May. This was the largest monthly decline since April 2025, when the federal government removed the consumer portion of carbon pricing.
Much of inflation in June was driven by travel-related services. Canada hosted the majority of its men’s World Cup games in June, which meant higher prices for multiple categories—including accommodation (10.1 per cent), rentals of passenger vehicles (6.8 per cent), air travel (9.6 per cent) and travel tours (6.8 per cent). The World Cup effect should be less evident in July, as only three matches were held in Canada during this month, while travel prices will likely return to a more normal base.
The sticky item is still grocery prices at 3.9 per cent—which has matched or outpaced the headline number for years and remains a major driver of inflation.
