| Consensus | Consensus Range | Actual | Previous | |
| CPI - M/M | -0.2% | -0.2% to -0.2% | -0.4% | 1.0% |
| CPI - Y/Y | 3.0% | 2.8% to 3.0% | 2.8% | 3.2% |
| Core CPI - M/M | 0.3% | 0.7% | ||
| Core CPI - Y/Y | 2.0% | 1.7% to 2.3% | 1.8% | 1.6% |
Highlights
Canada's inflation eased more than expected in June, as prices contracted 0.4 percent on the month due to lower gasoline prices. This was the largest monthly decline since December 2024, bringing the 12-month rate down to 2.8 percent from 3.2 percent in May.
Excluding food and energy, the 12-month core inflation rate came in below expectations, at 1.8 percent, still up from 1.6 percent in May.
While inflation remained above the 2 percent target in June, the Bank of Canada had projected a"still elevated" rate that would ease in the following months, to return to target at the beginning of 2027. Today's report shows that headline inflation has already started to ease, providing some relief to the central bank as it faces the dilemma of ensuring price stability amid a high degree of geopolitical uncertainty. The 12-month inflation rate averaged 2.9 percent in the second quarter, slightly below the BoC's 3.0 percent projection. This is up from 2.2 percent in the first quarter.
A 6.8 percent drop in energy and a 0.2 percent decrease in food drove prices down on the month. Core inflation, excluding these two categories, was up 0.3 percent from May.
Gasoline prices, down 10.2 percent in the month, were the largest contributor to the monthly decline in the overall Consumer Price Index. Diplomatic talks and an interim ceasefire arrangement contributed to an easing of global oil prices in June.
The CPI excluding gasoline edged up 0.1 percent on the month and was up 2.2 percent from June 2025, the same as in May. Inflation excluding gasoline averaged 2.1 percent in the second quarter, down from 2.5 percent in the previous quarter.
The BoC's own measures of core inflation came down in June. The average of CPI-trim and CPI-median was 1.9 percent in June, down from 2.1 percent in May.
Housing-related categories were the main downward contributors to the 12-month CPI change, with a 2.4 percent year-over-year decline in homeowners' replacement cost, followed by other owned accommodation expenses (down 2.1 percent), and household appliances (down 4.8 percent). Internet access services dropped 3.8 percent year-over-year.
While gasoline was the main downward contributor for the monthly CPI change, it was the largest upward contributor to the 12-month inflation rate, with a 20.5 percent increase from June 2025. Still, this was a slowdown from 33.2 percent the previous month, explaining the overall inflation slowdown in June. Other top upward contributors to the 12-month CPI gain in June were rent (3.5 percent), food purchased from restaurants (2.7 percent), and property taxes and other special charges (5.6 percent).
With gasoline down over 10 percent on the month, transportation decreased 1.5 percent. Among the eight major categories, clothing and footwear was down 0.8 percent, household operations, and furnishings and equipment down 0.2 percent. On the upside, shelter, recreation, education and reading, and health and personal care all edged up 0.1 percent.
On a 12-month basis, prices increased in seven categories, while prices for household operations, furnishings and equipment declined 0.2 percent from June 2025.
Overall, goods prices declined 1.2 percent on the month, for a 12-month increase of 3.5 percent. Services were up 0.3 percent from May and 2.2 percent year-over-year.
As Canada was one of the soccer World Cup hosts, the country experienced an acceleration in price gains for traveller accommodation to 10.1 percent year-over-year in June from 2.5 percent in May.
The seasonally adjusted CPI edged down 0.1 percent in June following a 0.4 increase in May. But excluding food and energy, the index increased 0.3 percent, the same as in May.
Market Consensus Before Announcement
Falling fuel prices expected to dampen CPI in June with the annual rise seen at 3.0 percent versus 3.2 percent in May.
Definition
The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI provide widely used measures of inflation. The policy target measure for the Bank of Canada (BoC), the annual CPI rate can be distorted by swings in the more volatile subsectors so the central bank also monitors an adjusted measure of the CPI that excludes a range of volatile categories in order to get a better handle on underlying trends.
Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as Canada, where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
As the most important indicator of inflation the CPI is closely followed by the Bank of Canada. The Bank of Canada has an inflation target range of 1 percent to 3 percent but focuses on the 2 percent midpoint. It uses the CPI and three measures of the underlying rate as the prime inflation indicators. Markets also look at core rate which excludes food and energy.