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Canada Inflation May 2024

Canada: Inflation rises in May

Inflation edged up to 2.9% in May from April’s 2.7%. This contrasted market expectations of a slowdown to 2.6%, but was still just within the Central Bank’s 1.0%–3.0% target range. Looking at the details of the release, the uptick in headline inflation was driven by higher transport price pressures.

The trend pointed down slightly, with annual average inflation coming in at 3.1% in May (April: 3.2%). Meanwhile, core inflation rose to 1.8% in May from the previous month’s 1.6%.

Lastly, consumer prices rose 0.56% from the previous month in May, picking up from April’s 0.50% increase.

On the significance of the reading for monetary policy, Desjardins’ Randall Bartlett said:

“Despite the unexpected uptick in total inflation in May, it has remained within the Bank of Canada’s 1% to 3% target range for five consecutive months—the first time that’s happened since the disinflationary days early in the COVID-19 pandemic. At 2.8% y/y, headline inflation in April and May averaged below the Bank’s forecast of 2.9% for Q2 in the April 2024 Monetary Policy Report. Most measures of underlying inflation remain below 3% as well and have been for a few months. Taken together, we continue to expect a rate cut at the Bank of Canada’s upcoming July interest rate announcement. That said, the May price data puts more weight on the upcoming employment and inflation releases.”

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