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Canada Inflation May 2023

Canada: Inflation declines to lowest level since June 2021 in May

Inflation came in at 3.4% in May, down from April’s 4.4% and in line with market expectations. However, inflation was still well above the Bank of Canada’s 2% target. May’s figure marked the weakest inflation rate since June 2021. Looking at the details of the release, prices for housing and food grew at a slower rate in May. Meanwhile, prices for transportation dropped after growing in the previous month.

Annual average inflation fell to 6.0% in May (April: 6.4%). Meanwhile, core inflation fell to 3.7% in May, from April’s 4.1%.

Lastly, consumer prices rose 0.38% over the previous month in May, which was below April’s 0.71% increase. May’s result marked the softest rise in prices since December 2022.

On the monetary policy implications, Desjardins’ Randall Bartlett said:

“Price growth in Canada is still too high. This means that demand remains too elevated to get inflation sustainably back to the Bank of Canada’s 2% target. Taken together, we continue to be of the view that the Bank of Canada will hike by another 25 basis points in July, while leaving the door open to further tightening if the data fails to cooperate over the summer.”

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