Mortgages, cars and meals out got costlier for Canadians in May but falling energy and transport prices helped keep inflation flat, data showed Tuesday.
Statistics Canada said Canadians paid 1.7 per cent more for goods and services in May than a year earlier, matching the previous month’s increase and in line with expectations.
Rents went up at a slower pace than in April, due to increased availability of rental units coupled with slower population growth, according to Statistics Canada.
But mortgage interest costs also rose, along with prices for new cars and trucks, vehicle insurance premiums, and restaurant meals.
A decline in costs for air transport, gasoline, natural gas, and cellular services, meanwhile, put downward pressure on inflation.
CIBC Economics analyst Katherine Judge called the moderation in core inflation measures “a step in the right direction” for the Bank of Canada to continue cutting its key lending rate.
The central bank had steadily lowered its policy rate over the past year before recently pausing at 2.75 per cent, saying it needed more time to assess the impact of a trade war with the U.S. on the Canadian economy.
It is scheduled to announce its next rate move at the end of July.
TD Economics analyst Andrew Hencic noted that the labour market remains soft and combined with “tepid domestic demand growth should keep a lid on inflationary pressures.”
“The outlook is heavily dependent on how trade negotiations evolve, but we believe that the soft economic backdrop should give the Bank of Canada space to deliver two more cuts this year,” he said.
Prime Minister Mark Carney and U.S. President Donald Trump, after meeting on the sidelines of a Group of Seven summit last week in Canada, indicated the two sides could reach a trade deal within 30 days.
