• MMT App
  • Careers
  • Contact
  • French
  • Find an Expert
  • Home
  • Mortgage Prep
  • Buying a Home
  • Renewal
  • Commercial
  • Rates & Lenders
  • More Value
  • Economic Insights
  • Our House Blog
  • MMT App
  • Careers
  • Contact
  • French
  • Find an Expert
  • All
  • COVID-19
  • Finance
  • Housing Market

Published by Sherry Cooper

June 25, 2024

Canadian CPI Inflation Rose in May, Reducing the Chances of a July Rate Cut.

Canadian Inflation Rose In May, Surprising Markets

Inflation unexpectedly rose in May, disappointing the Bank of Canada as it deliberates the possibility of another rate cut next month. 

The Consumer Price Index (CPI) rose 2.9% in May from a year ago, up from a 2.7% reading in April. This increase primarily reflects higher prices for services and, to a lesser extent, food. According to a Bloomberg survey, economists had expected 2.6% inflation last month.

Cellular services, travel tours, rent, and air transportation boosted service prices by 4.6% year-over-year (y/y) in May, up sharply from the 4.2% rise in April. Price growth for goods remained at 1%, although grocery prices rose more rapidly. 

Monthly, the CPI index climbed 0.6% compared to expectations for a 0.3% gain and up from 0.5% in April. On a seasonally adjusted basis,  inflation rose 0.3%.

The Bank of Canada’s preferred measures of core inflation, the trim and median core rates, exclude the more volatile price movements to assess the level of underlying inflation. The CPI trim accelerated to 2.9% in May, following a downwardly revised 2.8% rise the previous month. The CPI median rose two ticks to 2.8%. Both measures of core inflation surprised economists on the high side.

Shelter costs have been a massive component of inflation this cycle. In May, rent rose a whopping 0.9%, lifting the yearly rise to 8.9% y/y, the second largest contributor to annual inflation. The single most significant inflation driver–mortgage interest costs–ticked down a bit to 0.8% m/m, reducing the yearly pace to 23.3%. It peaked above 30% last year. Excluding shelter, inflation is rising 1.5% y/y, up from 1.2% last month.

Bottom Line

Today’s inflation reading was undoubtedly a disappointment for the Bank of Canada, and it reduces the chances of another rate cut when they meet again on July 24. However, the June inflation data will be released on July 16. Barring a significant drop in June inflation, the next interest rate cut will likely be at the September meeting. That’s not good for the housing market, which has slowed to a crawl in recent months. The decline in mortgage rates proceeds as market forces drive down bond yields. Canada’s labour market is slowing as the jobless rate ticks up. Tiff Macklem said yesterday that he did not expect the unemployment rate to rise significantly further this cycle.

Interest rate cuts will be more gradual because rapid population growth has boosted economic activity, forestalling a recession and adding to inflationary pressure. The central bank’s overnight policy rate, now at 4.75%, will gradually move to 3.0% by the end of next year.

Please Note: The source of this article is from SherryCooper.com/category/articles/

Share this:
Categories: Finance

Recommended articles.

View More

National Home Sales Fall In September, Breaking A Five-Month Streak

October 16, 2025

Canadian Home Sales Post Best September In Four Years Today’s release of the September housing data by the Canadian Real Estate Association (CREA) showed a pullback on the housing front. The […]

Read More

Employment Rose in September Following Declines in Prior Two Months

October 10, 2025

Canadian Employment Rises More Than Expected, But Not Enough To Fully Offset Prior Two-Month Job Loss Today’s Labour Force Survey for September was stronger than expected, with a net employment […]

Read More

In Conversation with Dr. Sherry Cooper (September 2025)

September 17, 2025

Dr. Sherry Cooper joined Dominion Lending Centres and DLCG Mortgage Group President, Eddy Cocciollo, for In Conversation to discuss the latest updates from the Bank of Canada as of September 17, 2025.

Read More

The Bank of Canada Lowers the Policy Rate By 25 Basis Points to 2.5%

September 17, 2025

Bank of Canada Lowers Policy Rate to 2.5% Today, the Bank of Canada lowered the overnight policy rate by 25 bps to 2.5% as was widely expected. Following yesterday’s better-than-expected […]

Read More

Headline Inflation Rises Less Than Expected, Giving the Green Light to BoC Easing

September 16, 2025

Canadian Inflation More Muted Than Expected, Giving the Green Light for BoC Easing Tomorrow The Consumer Price Index (CPI) rose 1.9% on a year-over-year basis in August, up from a 1.7% increase […]

Read More
  • Find an Expert
  • Home
  • Mortgage Prep
  • Buying a Home
  • Renewal
  • Commercial
  • Rates & Lenders
  • More Value
  • Economic Insights
  • Our House Blog
  • MMT App
  • Careers
  • Contact
  • French
  • Find an Expert

© 2025 Dominion Lending Centres Inc. All rights reserved. Privacy Policy Terms & Conditions