US inflation rate drops to 3.4 percent in May

The latest data from Statistics Canada shows that inflation slowed down to 3.4% in May, a welcome relief for Canadians who have been feeling the pinch of high prices. However, despite this slowdown, the Bank of Canada still has its work cut out for it as it continues to battle high inflation.

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Headline Rate Slows Down

The headline rate of inflation, which measures the total change in prices across all goods and services, slowed down from 3.6% in April to 3.4% in May. This slowdown is a sign that price pressures are easing, but it’s still above the Bank of Canada’s target range of 1-3%.

Core Inflation Slows Down as Well

Core inflation, which measures prices excluding food and energy, also slowed down from 3.7% in April to 3.5% in May. This slowdown is a sign that price pressures are easing across the economy.

Grocery Prices Still Rising

One area where prices are still rising is grocery stores. Grocery prices rose by 9.1% over the past year, with meat and poultry prices up 17.4%. However, this rise was less than expected, which could be a sign that price pressures in this sector are easing.

Restaurant Food Prices Rise

Restaurant food prices also rose, increasing by 6.8% over the past year. This rise is due to ongoing labour shortages and rising input costs.

Cellular Services and Furniture Prices Fall

However, not all prices are rising. Cellular services saw a decline of 8.2% over the past year, while furniture prices fell by 2.9%.

Mortgage Interest Costs Rise

One area where prices are still rising is mortgage interest costs. The yearly mortgage interest cost index increased to 29.9%, its third consecutive month at a new record high.

Bank of Canada’s Next Move

The Bank of Canada will be watching these numbers closely as it decides whether to raise interest rates again in July. Governor Tiff Macklem has said that the bank will continue to hike interest rates until inflation returns to 2%.

Economists Weigh In

Stephen Brown, deputy chief North America economist at Capital Economics, says that while the slowdown in inflation is welcome news, it’s still not enough to convince him that another rate hike won’t be necessary. "With even the one-month annualized CPI-trim and CPI-median inflation rates still above 2%, and the housing market heating up, we still judge that another hike is more likely than not," he said.

Conclusion

The slowdown in inflation is a welcome relief for Canadians who have been feeling the pinch of high prices. However, despite this slowdown, the Bank of Canada still has its work cut out for it as it continues to battle high inflation. The bank will be watching these numbers closely as it decides whether to raise interest rates again in July.