Canada’s inflation climbed to 1.9% in June, driven by rising car and clothing prices. Lower grocery costs offered modest relief. Rate cuts now uncertain.
Inflation Inches Up as Canadians Face Higher Costs
Canada’s annual inflation rate increased to 1.9% in June, fueled by rising costs for vehicles and clothing, according to new national data. The modest but notable uptick signals continued pricing pressures across key consumer sectors.
Vehicle Prices Lead Monthly Increase
Passenger vehicles saw some of the steepest gains last month. Prices for both new and used cars surged, with used vehicle prices climbing year-over-year for the first time in 18 months. New cars posted a 5.2% inflation rate, while overall passenger vehicle prices rose 4.1%, up from 3.2% in May.
Apparel Inflation Driven by Tariff Uncertainty
The clothing and footwear category recorded a 2% year-over-year increase, marking a significant acceleration. Analysts attribute this rise to tariff uncertainty affecting the global apparel supply chain, placing additional pressure on retailers and consumers.
Grocery Price Growth Slows, Slight Relief for Shoppers
In the grocery aisle, price growth cooled slightly. Food prices rose 2.8%, compared to 3.3% in May. The easing came largely from a drop in prices for fresh fruits and vegetables—the first recorded decline in that category since October 2021.
Fuel Prices Hold Steady Amid Global Tensions
Despite geopolitical uncertainty and rising crude oil costs, gasoline prices remained nearly unchanged in June. This stability offered some relief at the pumps, even as energy markets continue to experience volatility.
Rate Cut Hopes Dim as Inflation Persists
Economists had forecast the June inflation rate to reach 1.9%, aligning with expectations. However, market analysts now suggest the Bank of Canada is unlikely to reduce interest rates in its upcoming decision.
One leading economist noted that persistent price pressures—particularly in vehicles, housing, and trade-sensitive goods—are keeping inflation at the upper end of the central bank’s comfort range.
“If the data doesn’t show further cooling, the Bank is unlikely to act,” he said. “A rate cut may be possible by September, but only if inflation softens more clearly.”
U.S. Sees Similar Trends
Meanwhile, U.S. inflation also rose to 2.7% in June, up from 2.4% in May. Americans faced higher costs across the board, including for gas, groceries, and appliances, mirroring Canada’s inflation challenges on a broader scale.
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