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Canada CPI eyed for sign headline inflation cools

Economists expect gasoline prices to fall sharply in June, while core inflation is forecast to stay near its recent steady pace.

Reported · Written up by our desk · Central Banks

Ahead of Canada’s June CPI release on Monday, Action Forex is looking for evidence that headline inflation has cooled while underlying price pressures remain contained, a key input for the Bank of Canada’s ongoing decision to stay on hold.

Action Forex expects headline CPI inflation to ease to 2.8% year over year from 3.2% in May, with much of the drop linked to lower energy costs. It points to anticipated declines of 10.0% for gasoline and 6.3% for fuel prices from May, while noting energy would still be higher versus a year ago.

The analysis also forecasts food inflation holding firm at 3.6% year over year, only modestly lower than 3.8% in May. For the less volatile components, Action Forex expects inflation excluding food and energy to remain around 1.6% year over year, and says the BoC’s preferred core measures are likely to stay consistent with inflation running near the 2% target.

The outlet says the distinction between headline and underlying inflation has been central to the BoC’s assessment, focusing on whether higher energy costs spill into broader consumer prices. It also flags Statistics Canada’s preliminary estimate of a 1.0% increase in nominal retail sales in June, estimating about a 0.5% rebound after adjusting for price effects.

Latest closeGasoline (RBOB) $3.114 ▼5.7%

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