Canada's annual inflation rate accelerated to 3.2% in May, up from 2.9% in April, largely due to higher gasoline prices, Statistics Canada reported on June 22, 2026.
Gasoline prices drive increase
Gasoline prices rose 8.1% on a year-over-year basis in May, compared with a 5.2% increase in April. Excluding gasoline, the consumer price index rose 2.8% in May, down from 2.9% in April.
“The increase in May was primarily driven by higher prices for gasoline, which rose 8.1% compared with May 2025,” StatCan said in its report. The agency noted that global oil prices and refinery maintenance contributed to the rise.
Core inflation measures mixed
StatCan’s two core inflation measures—CPI-trim and CPI-median—averaged 2.9% in May, unchanged from April. CPI-trim rose 3.0%, while CPI-median held at 2.8%. These measures exclude volatile items and are closely watched by the Bank of Canada.
“Core inflation remained sticky, suggesting underlying price pressures persist,” said economist Avery Shenfeld of CIBC Capital Markets in a note. “The Bank of Canada will likely remain cautious.”
Regional and sectoral breakdown
Prices rose in all provinces, with the highest annual rates in Prince Edward Island (3.8%) and Nova Scotia (3.5%). The lowest was in Saskatchewan (2.9%).
Food prices increased 2.5% year-over-year, down from 2.8% in April. Shelter costs rose 4.1%, led by a 6.2% increase in rent and 4.9% rise in mortgage interest costs. Services inflation eased to 3.6% from 3.8%.
Impact on monetary policy
The inflation reading comes ahead of the Bank of Canada’s next interest rate decision on July 15. The central bank has held its key rate at 4.75% since April after cutting from 5.0% earlier in 2026.
“Today’s data reduces the odds of a July rate cut,” said Royce Mendes, head of macro strategy at Desjardins. “The Bank will want to see more sustained progress before easing further.”
Markets now see a 35% probability of a cut in July, down from 50% before the release.
