Economists see encouraging signs in June inflation report beyond gas price break

Bloomberg07-21 01:40

Lower gas prices were the major force pulling the headline inflation rate down in June but economists weighing in on the latest price data Monday found even more encouraging signs under the hood of ...

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It’s clear that weak demand in the economy is weighing on inflation and holding businesses back from raising prices, she said.“June’s inflation report reinforces our view that the Bank of Canada can remain on the sidelines for quite some time,” Preston said.Price hikes at the grocery store also eased to 3.9 per cent in June, down from 4.3 per cent in May.Consumers saw prices for fresh fruit rise at a slower pace in June, driven by lower costs for grapes, StatCan said. But price hikes accelerated for fresh or frozen chicken, some bakery goods and items from the freezer section, offsetting those slowdowns.FIFA World Cup games in Toronto and Vancouver, meanwhile, saw costs for travel-related services like accommodation and rental cars surge in June. The cost of traveller accommodation was up around 20 per cent year-over-year in Ontario and British Columbia last month.Air transportation costs also jumped 9.6 per cent annually, marking the biggest increase in more than three years. StatCan said higher jet fuel costs and stronger demand for domestic travel drove the increase.Ali Jaffery, chief economist at KPMG, said in a note he expects headline inflation to hang around three per cent for a while longer, as June’s break at the gas pumps offered only a “temporary reprieve.”He said there was “considerable softness” across the rest of the consumer basket, outside the World Cup kicking up travel services prices.“The Bank of Canada can live with that as long as inflation expectations remain manageable, which we expect they will as businesses absorb most of the cost increases given slack conditions in the economy right now,” Jaffery said.Janzen said that despite the positive news on the inflation front, prices are still elevated, particularly at the gas pumps and the grocery store.The silver lining is that with underlying inflation still running cool, the Bank of Canada doesn’t need to act to slow the economy with rate hikes.Latest updates on investing here“Not a lot of consolation if you’re at the gas station filling up your car, but it does let the Bank of Canada be more patient in terms of not needing to add to those costs with higher interest rates,” Janzen said.He noted there are signs elsewhere in the economy that a recovery is underway: the unemployment rate has dipped lower and economic activity is growing again. But that doesn’t mean the economy is strong, by any means.RBC expects the Bank of Canada’s next change in interest rates won’t come until growth starts to pick up sometime in 2027. Even then, Janzen said a few hikes would only serve to normalize the central bank’s policy rate, raising it to a level where it’s neither supporting nor stifling growth.Financial market odds for another interest rate hold from the Bank of Canada at its next decision on Sept. 2 stood at more than 90 per cent as of Monday at noon, according to LSEG Data & Analytics.---Craig Lord, The Canadian PressThis report by The Canadian Press was first published July 20, 2026.Related StoriesAirfares jump and hotel prices soar amid World Cup demand spikeBank of Canada says food inflation likely to remain high for rest of 2026Bank of Canada ready to move ‘in either direction,’ Devlin says after rate hold","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":false,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"isLaohu8Offline":false,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.46.0","shortVersion":"4.46.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2653210707","isCrawlerRequest":true}