Canadian Consumer Price Index (June 2025)

Inflation ticks higher in June as fall in gasoline prices abates

• Headline CPI inflation for June came in at 1.9% year-on-year (y/y), heating up from the 1.7% print in May and in line with expectations. 
• The uptick was due to gasoline prices falling to a lesser extent in June (-13.4% y/y vs. -15.5% in April) and faster price growth for passenger vehicles and furniture.
• Prices for clothing and footwear also rose 2.0% y/y vs. 0.5% last month due to the women's clothing index not declining like it did in May. Statistics Canada also cited "uncertainty surrounding international trade" and tariffs putting upward pressure on costs for the clothing and footwear industry.
• The Bank of Canada's CPI-trim measure was unchanged for the month at 3.0% y/y, while the CPI-median index ticked higher to 3.1% y/y. The CPI excluding the eight most volatile components and indirect taxes (CPIX) accelerated to 2.7% y/y, from 2.5% in May, while CPI excluding food and energy was virtually unchanged at 2.6%. On a seasonally adjusted monthly basis, inflation accelerated for three of the four measures, while monthly inflation for CPI excluding food and energy was unchanged (+0.26% month-on-month).

Key Implications

• Another month of the inflation data coming in as expected. Top line price growth continues to be restrained by weak readings for gasoline. Moreover, "geopolitical conflicts" were cited as propping up crude prices in June, a factor that faded mid-month and should provide some offset in July. Meanwhile, core inflation held up on an annual basis, with the monthly figures also pointing to healthy price growth. The groundwork for July to continue June's story (weak top-line price growth and more core strength) looks to be set.    
• Healthy core price growth, coupled with last week's surprisingly robust employment gains now make a July cut from the Bank of Canada unlikely. However, renewed trade threats add to the uncertainty that has lingered over the economy since the start of the year. Looking forward, the course of trade negotiations and evidence of whether June's healthy labour market report was a one-off, or the start of a new trend, will be crucial. Ultimately, we believe that absent a quick resolution on trade, the economic backdrop should give the BoC space to deliver more easing this year. 

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