Canada\u0027s inflation increased 7.7 per cent in May from a year earlier, the fastest since 1983, Statistics Canada reported
There’s some early evidence of a correction in the inflation data, too. Statistics Canada’s measure of shelter costs, which attempts to broadly mimic the monthly cost of keeping a roof over our heads, increased 7.4 per cent from May 2021, the same as in April. Homeowners’ replacement cost, a proxy for real-estate prices, rose 11.1 per cent, down from 13 per cent in the previous month. Housing inflation appears to be cooling.
However, the partial offset from cheap mortgages is receding as interest rates rise. Statistics Canada said mortgage interest costs dropped 2.7 per cent in May from a year earlier, less than April’s 4.4 per cent decline. As a result, the cost of running a mortgage is now putting upward pressure on overall inflation.
The Bank of Canada is worried that inflation is becoming a self-fulfilling prophecy, and headlines about how prices are surging at the fastest pace in almost four decades will heighten that threat. Much of the upward pressure on prices is beyond the central bank’s control, but it is duty bound to keep the consumer price index advancing at an annual pace of about two per cent. Early signs that inflation is slowing are positive. Still, prices are rising too fast for comfort.
Correction: An earlier version of this story said gasoline prices increased 12 per cent from May 2021. Prices actually increased 12 per cent from April and 48 per cent from May 2021.
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