Inflation Takes a Breather as Canada’s Rate Eases to 2.8%
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Inflation in Canada slowed more sharply than expected in June 2026, mainly driven by lower gasoline prices, offering households some relief after the acceleration recorded a month earlier.
Statistics Canada reported Monday that the Consumer Price Index rose 2.8% year over year in June, down from a 3.2% increase in May. The result was also slightly better than economists’ expectations of a decline to 2.9%.
On a monthly basis, consumer prices fell 0.4%, marking the largest monthly decrease since December 2024. On a seasonally adjusted basis, the index declined 0.1%.
Gasoline was the main factor behind the slowdown. Prices at the pump fell 10.2% between May and June as global oil prices temporarily weakened.
Despite the monthly decline, gasoline prices remained 20.5% higher than in June of the previous year. However, that annual increase was significantly smaller than the 33.2% jump recorded in May.
Excluding gasoline, annual inflation held steady at 2.2%, suggesting that much of the improvement in the headline figure came from lower fuel costs rather than a broad decline across goods and services.
Grocery price pressures also eased slightly. Food purchased from stores increased 3.9% year over year, compared with a 4.3% rise in May. Grocery inflation nevertheless remained above the overall inflation rate for the seventeenth consecutive month.
Fresh fruit prices rose at a slower annual pace of 1.7%, while several essential food items continued to become more expensive. Prices for fresh or frozen chicken increased 5.7%, while bread, rolls and baked goods climbed 6%.
Travel-related costs moved in the opposite direction, as demand associated with the FIFA World Cup pushed accommodation and transportation prices higher in Canadian host cities.
Traveller accommodation prices increased 10.1% annually, including a 19.4% rise in Ontario and a 20% increase in British Columbia, reflecting stronger demand in Toronto and Vancouver.
Airfares rose 9.6%, marking their largest annual increase since February 2023. Vehicle rental and tour package prices each increased by 6.8%.
At the provincial level, Ontario recorded the slowest inflation rate at 2%, while Nova Scotia posted the highest rate among the provinces at 4.7%, partly due to rising traveller accommodation costs.
Measures of underlying inflation closely monitored by the Bank of Canada also eased. Median inflation declined to 1.9% from 2.1%, while trimmed inflation fell to 1.8% from 2%.
The Bank of Canada kept its key interest rate unchanged at 2.25% on July 15, saying inflation was expected to gradually moderate while warning that energy prices, tensions in the Middle East and U.S. trade policy continued to create uncertainty.
The central bank’s next interest-rate announcement is scheduled for September 2, 2026.
A decline in inflation to 2.8% does not mean prices have returned to their previous levels. It means prices are rising more slowly. Canadian households therefore continue to face pressure from grocery, transportation and travel costs despite the improvement in the headline inflation rate.
