Inflation Cools in June, But Food and Mortgage Costs Rise Sharply

The Consumer Price Index (CPI) rose 2.8% on a year-over-year basis in June, following a 3.4% increase in May. This marks the first time inflation has fallen below 3% since April 2021. The decrease was largely due to lower prices for gasoline, which fell by 12.7% in June. However, food and mortgage costs continued to rise sharply, offsetting some of the relief provided by lower gas prices.

The annual rate of inflation fell to 2.8% in June, putting it just below the top of the Bank of Canada's 1%-to-3% target range. This is the first time inflation has been within the target range since April 2021. The Bank of Canada has been raising interest rates in an effort to cool inflation, and the June CPI report suggests that these efforts may be starting to have an impact.

Despite the overall decline in inflation, food and mortgage costs continued to rise sharply in June. Food prices rose by 8.8% year-over-year, the largest increase since August 2022. Mortgage interest costs also rose by 7.6%, the largest increase since September 2020. These increases are putting a strain on household budgets, and are likely to continue to be a challenge for the Bank of Canada as it tries to bring inflation back to its target range.