By Robb M. Stewart
OTTAWA--A further surge in Canadian gasoline prices last month drove inflation in the country to its hottest in more than two years.
The consumer-price index climbed 1% in May, pushing the annual rate to 3.2%, the highest level since the end of 2023, Statistics Canada said Monday.
A third straight month of increased pump prices as the conflict in the Middle East continued to restrict crude oil supplies meant Canadians were paying the most for gasoline since mid-2022, when Russia invaded Ukraine. Stripping out gasoline, annual inflation edged up 0.2 percentage point to 2.2%.
The overall pace of inflation sits roughly in line with the Bank of Canada's most recent forecast for it to hover around 3% near term before easing gradually toward its 2% target.
May's inflation report will be the last before the central bank's governing council meets next month to decide on interest rates, though the recent pullback in oil prices suggests it may still have room to look through the latest inflation data.
Underlying measures of inflation remained cooler than the headline pace. Core inflation excluding volatile food and energy costs ticked up to 1.6% from a year earlier. And the trimmed mean and weighted median measures of underlying inflation preferred by the Bank of Canada held steady at 2.05%.
Canadians still face elevated grocery costs. Food bought from stores rose 4.3% year-over-year, a 16th consecutive month it has outpaced headline inflation. This was led by higher prices for fresh fruit and fresh vegetables in May, with households paying more for items such as berries, broccoli, cauliflower and tomatoes.
Canadians also paid more for travel tours and air fares, both of which rebounded after falling in April. Airlines around the world have faced a jump in operating costs, including a spike in jet fuel.
Still, prices for shelter continued to decelerate. Rent cooled modestly, rising 3.5% in May versus a year earlier, the softest rise since January 2022. The homeowners' replacement cost index fell annually for a 13th month in a row, and other accommodation expenses like real estate sale commissions also declined.
Overall price growth for durable goods stabilized, holding at 1.9% last month. Prices for computer equipment and supplies were up, but price increases slowed for items including household equipment and passenger vehicles, and fell at a faster pace for household appliances.
The Bank of Canada has left its key policy interest rate unchanged at each of its last five meetings and has projected the core measures of inflation it tracks will average around 2.1% for the second quarter. Still, officials have signaled a need to change course quickly depending on developments in the Middle East, as well as trade tensions with the U.S. as the current North American trade pact is being renegotiated.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
June 22, 2026 08:53 ET (12:53 GMT)
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