Canada Inflation Jumps to 3.2% on Gasoline Surge

This acceleration from 2.8% in April also saw consumer prices rise 1% on a monthly basis. The substantial increase in gasoline prices, attributed to Middle East tensions affecting energy markets, was the main contributing factor.

Excluding gasoline, annual inflation stood at a more moderate 2.2%, while inflation excluding both food and energy rose to 1.6%. The Bank of Canada's preferred core inflation measures, CPI-trim and CPI-median, remained unchanged at 2.1%, indicating that underlying price pressures are more contained than the headline figure suggests.

Food inflation accelerated to 3.8% from 3.5%, partly due to higher fresh fruit and vegetable prices, while air transportation prices increased 7.4% after a 1.7% decline in April. Shelter inflation continued its easing trend, slowing to 1.7% year-on-year from 1.8% in April.

Statistics Canada data also showed that price pressures became less broad-based, with 35% of goods and services in the consumer basket rising at or above an annual pace of 3% in May, a decrease from 45% in December. Following the data release, the Canadian dollar strengthened against the US dollar, and short-term government bond yields edged higher as investors adjusted their outlook for Bank of Canada monetary policy.