Canada's annual inflation rate fell slightly more than expected to 2.7% in June, mainly due to softer gas price growth, while a measure of core inflation edged down marginally, based on data released on Tuesday, ahead of the central bank's interest rate announcement next week. .
Analysts interviewed by Reuters had forecast the inflation rate to decline to 2.8% from 2.9% in May.
Month-on-month, the consumer price index fell 0.1%, compared to forecasts. This was the first decline in the monthly inflation rate since December, according to Statistics Canada data.
Data on Tuesday showed that headline inflation was cooler than the Bank of Canada's inflation forecast of 2.9% for the end of the first half of 2024. The central bank, in a forecast released in April, said that inflation is expected to slow gradually to less than 2.5% in the second half of 2024 before reaching the bank's 2% target in 2025.
The BoC will publish its updated forecast on July 24, along with its interest rate decision. Last month, the bank cut its key overnight interest rate by 25 basis points after holding it at the highest rate in more than two decades for about a year, and money markets see about an 80% chance of another cut next week.**
The average of the Bank of Canada's two preferred core inflation measures CPI-median and CPI-trim decreased slightly to 2.75% in June from 2.80% in May.
The decline in headline inflation was largely due to lower gas prices, which rose at an annual rate of 0.4% in June, down from 5.6% in May. Excluding gas prices, the CPI rose 2.8% on an annual basis, based on Statscan information.
An increase in the price of food purchased from stores as well as a smaller decrease for cellular service in June restrained a cooling in inflation. Excluding food and energy, prices rose 2.9% in June, the same as May. Prices of services rose 4.8% year-on-year in June, compared to a 4.6% increase in May, while goods inflation slowed to 0.3% from 1%.
