ICYMI: Canada's inflation rate surges to 8.1%: What you need to know Canada inflation economy
Some Bay Street economists were predicting even faster inflation. It might be too soon to say for sure, but the rapid cooling of the housing market could be offsetting inflationary pressures elsewhere. Statistics Canada’s index of shelter costs increased 7.1 per cent in June, slower than the 7.4 per cent posted in May. The agency observed that real-estate agents are collecting lower commissions because prices have dropped.
In the near term, higher interest rates could exert upward pressure on shelter costs because mortgages will be rising. However, if home prices continue to fall, “this could lead higher rates to more quickly dampen high inflation in Canada relative to the U.S.,” Veronica Clark, an economist at Citigroup Global Markets Inc., said in a note to her clients. “This is a fundamental reason why we still think policy rates could reach a slightly lower terminal level in Canada than in the U.S.
Another sign that inflation could be peaking is a deceleration in the pace of increases from month to month. The consumer price index rose 0.7 per cent from May, considerably slower than the previous monthly increase of 1.4 per cent. Commodity prices are finally responding to gravity, and that could ripple through the cost of finished goods in the months ahead.Article content
The release “points to some potential positive news on the price front,” Randall Bartlett, an economist at Desjardins Group, said in a note, before adding that the news wasn’t so positive that it will keep the Bank of Canada from increasing the benchmark rate by either a half point or three-quarters of a point in September.
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