Elevated gasoline prices caused by the Iran conflict sent Canada’s inflation to a 29-month high in May, official data showed Monday, but there are signs cost increases are easing.
The country’s year-on-year inflation hit 3.2 per cent last month, Statistics Canada said, noting that “the closure of the Strait of Hormuz put upward pressure on gasoline prices.”
May prices at the pump were 33.2 per cent higher than the same period last year, the agency added.
While the month’s annualized inflation rate well exceeded the Bank of Canada’s ideal target rate of two per cent, experts said the overall picture did not raise immediate alarm about a generalized rise in consumer costs.
“Oil prices are down significantly since a tentative peace deal between Iran and the U.S. was reached, and gasoline prices have been following suit,” said senior TD Bank economist Leslie Preston.
“We expect May to mark the peak for headline inflation this year,” Preston added.
The Bank of Canada has held its core interest rate at 2.25 for five consecutive announcements.
The bank has said it is facing two conflicting forces — an economy struggling under the weight of U.S. tariffs that may need a rate cut to fuel growth, and inflation pressure from the Middle East war that may require a hike.
