The Consumer Price Index (CPI) rose 1.9% year-over-year in June, up from 1.7% in May, Statistics Canada reported today.
The increase was broadly in line with expectations and was largely driven by a smaller year-over-year drop in gasoline prices and firmer prices for durable goods, including autos and furniture.
While headline inflation remains below the Bank of Canada’s 2% target, key measures of core inflation remained sticky.
The Bank of Canada’s preferred core metrics—the CPI-trim and CPI-median—came in at 3.0% and 3.1%, respectively, with the median edging up slightly from 3.0% in May. The CPIX index, which excludes the eight most volatile components and indirect taxes, accelerated to 2.7% from 2.5% in May.
“Today’s result gives the Bank of Canada almost nothing to justify a rate cut in July,” BMO Chief Economist Douglas Porter wrote in a note. “If the solid employment report was the icing on the cake for that decision, this is the cherry on top. Simply put, underlying inflation remains stubbornly strong.”
Prices for goods like vehicles, furniture and clothing contributed to June’s inflation rise, with durable goods inflation picking up to 2.7% as vehicle prices posted their first year-over-year gain in used models in 18 months.
Meanwhile, grocery inflation eased slightly to 2.8% as vegetable prices fell, though some categories—like coffee—saw sharp increases, with prices up 23.2% year-over-year.
Shelter costs continue to dominate inflation
Shelter inflation was unchanged at 2.9% year-over-year, but rent and mortgage interest costs remained the largest upward contributors to inflation.
“Rent actually ticked up to 4.7% y/y, and was the single biggest contributor to inflation over the past year,” Porter said. “Mortgage interest costs continue to wane, but they are still a meaty 5.6% y/y.”
CIBC economist Ali Jaffery said the rise in rent “flies in the face of the anecdotal evidence of the rental market cooling, especially in Ontario,” but noted the series has become “notoriously volatile” since StatCan revised its methodology before the pandemic.
Outlook: More waiting ahead
Even with headline inflation still hovering near the Bank of Canada’s comfort zone, economists say persistently high core readings are likely to keep rate cuts on hold
“With trade policy uncertainty still near an all-time high and core price pressures likely too firm for the BoC to be confident that underlying inflationary pressures are contained, we expect it will continue to hold the overnight rate steady at 2.75% on July 30,” Oxford Economics said in a research note.
CIBC echoed that sentiment, stating: “We expect the Bank to remain on pause in July because this is a central bank that by its own admission isn’t very comfortable being forward-looking.”
Unless the economy takes a noticeable turn for the worse or inflation shows more convincing progress, economists say a September rate cut is still on the table, though it will largely hinge on the data that comes in between now and then.
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Last modified: July 15, 2025