Canada Inflation Surges to 1.9% Amid Limited Tariff Pass-Through

Canada's inflation rate rose to 1.9% in June, up from 1.7% in April, according to Statistics Canada. Despite a slight increase, core measures of inflation remained hot, averaging over 3%. The Bank of Canada is likely to keep interest rates unchanged for a third straight meeting due to underlying inflation remaining elevated and the breadth of inflationary pressures widening. Consumer inflation averaged 1.8% for Q2, cooling from Q1 but quicker than expected.

Canada's inflation rate rose to 1.9% in June, up from 1.7% in April, according to Statistics Canada [1]. This slight increase comes after a period of steady inflation, with economists predicting the annual pace of inflation to rise to 1.9% for the month [2].

The rise in inflation was driven by significant price increases in passenger vehicles and clothing and footwear. Passenger vehicles saw a 4.1% year-over-year increase, the first such increase in 18 months, while clothing and footwear prices rose by 2% year over year [1]. These increases were attributed to tariff uncertainty and the removal of the consumer carbon tax, which had previously impacted energy prices [4].

Despite the headline inflation figure meeting expectations, core measures of inflation remained elevated, averaging over 3%. This persistence in core inflation has led economists to predict that the Bank of Canada will likely keep interest rates unchanged at its upcoming meeting [2]. The central bank is expected to remain cautious due to the breadth of inflationary pressures and the uncertainty surrounding fiscal and trade policies [2].

The Canadian economy saw a slowdown in consumer inflation during the second quarter, with an average rate of 1.8%, down from the first quarter's rate. This cooling is quicker than expected, but it remains to be seen if this trend will continue [4].

References:
[1] https://www.cbc.ca/news/business/inflation-rate-june-1.7585178
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L6N3T80PQ:0-canada-s-annual-inflation-rate-increases-to-1-9-in-june/
[4] https://tradingeconomics.com/canada/inflation-cpi