The Canadian inflation rate remained unchanged in May, clouding the interest rate outlook.
Statistics Canada’s consumer price index (CPI) on Tuesday pegged headline inflation at 1.7% in May, steady from the April reading and mostly in line with analyst and economist expectations.
Smaller price increases for rent and a decline in the cost of travel tours put downward pressure on prices in May, while more modest price drops for gasoline and cell phone service slowed the overall decline, StatsCan said.
Excluding energy, the CPI rose 2.7% in May, following a 2.9% increase in April. On a monthly basis, the CPI rose 0.6% in May. On a seasonally adjusted monthly basis, the CPI was up 0.2%.
Core measures of inflation did ease slightly in May, but it remains to be seen whether that will be enough for the Bank of Canada to consider an interest rate cut.
The Bank earlier this month opted to hold its key overnight rate at 2.75% for the second straight time, following seven consecutive cuts totaling 225 basis points between mid-2024 and early 2025. Bank of Canada officials cited persistent core inflation and rising cost pressures — partly driven by trade-related tariffs — as reasons to maintain a cautious approach.
The Bank of Canada will make its next interest rate announcement on July 30.
Lower interest rates would certainly be welcomed by Canadian farmers. A Statistics Canada farm income report released in May estimated nationwide farm debt at the end of 2024 at $166.7 billion, up 14.1% from a year earlier and largest annual increase since 1981 when it jumped almost 15% to $18.3 billion.
