Canada’s annual inflation rate moderated faster than expected to 2.8% in June as fuel costs fell sharply. According to the latest data from Statistics Canada, the drop in gasoline prices at the pump came in the wake of the signing of a memorandum of understanding between the US and Iran to end a previous armed conflict.
The latest Consumer Price Index (CPI) reading beat the consensus forecast of economists surveyed by Reuters, which had forecast annual inflation at 2.9% and a monthly decline of 0.2%. The decline marked a significant recovery from May’s reading, which hit a 29-month high of 3.2%.
A drop in gasoline prices of more than 10% in one month was the main driver of the decline in overall inflation, with the annual increase slowing to 20.5%. However, excluding the gasoline component, the core inflation rate remained stable at 2.2% compared to the previous month.
Despite the decline in overall inflation, several key sectors remained under price pressure. Transportation costs rose 6.7% year-on-year, while grocery prices rose 3.9%. This marked the 17th consecutive month in which food inflation has outpaced the overall CPI rate.
Following the economic data, the Canadian dollar fell 0.18% to C$1.4045 against the US dollar. Analysts warned that the downward trend in inflation may be temporary as geopolitical tensions in the Middle East have begun to rise again, pushing up global energy costs.
