Inflation numbers kill rally Canada’s annual inflation rate reaccelerated unexpectedly to 2.9 per cent in May while measures of core inflation also increased, according to Statistics Canada, reducing the odds of a Bank of Canada rate cut in July.
Analysts had expected inflation to cool to 2.6 per cent from 2.7 per cent in April, according to Reuters. Statistics Canada said on Tuesday that acceleration was largely due to higher prices for services, which increased 4.6 per cent in May after a 4.2 per cent increase in April. The services price growth was led by cellular services, travel tours, rent and air transportation.
The Bank of Canada's closely watched measures of core inflation also edged up in May, surprising economists. CPI-median increased from 2.6 per cent in April to 2.8 per cent in May, while CPI-trim was up from 2.8 per cent in April to 2.9 per cent in May. Economists expected CPI-median to be 2.6 per cent, and CPI-trim to be 2.8 per cent.
"Inflation moved in the wrong direction in May," CIBC economist Katherine Judge wrote in a note on Tuesday.
"Overall, with the data showing much faster price pressures than expected, this casts a lot of doubt on the possibility of a July cut."