Canadian Inflation Rises in June as Domestic Price Pressures Build, Says RBC

11:25 AM EDT, 07/15/2025 (MT Newswires) -- Canadian headline inflation edged higher in June, as expected, following last month's downside surprise, with the consumer price index rising to 1.9% year-over-year and aligning with pre-release projections, said RBC.

It remains too early to determine whether the recent increases in auto and grocery prices are fully attributable to tariffs in the trade war with the United States, noted the bank. But the bulk of upward pressure on prices in recent months has come from domestically produced excluding shelter services, which are more reflective of domestic consumer demand trends than external factors.

Year-over-year inflation continues to be skewed by the removal of the federal carbon tax, pointed out RBC. The Bank of Canada's preferred core measures exclude the effects of that tax change and both CPI-median and CPI-trim measures have held steady at around 3% year over year since April, remaining significantly above the BoC's 2% inflation target.

The bank continues to expect Canada's restrained approach to retaliation against tariffs from the U.S. administration will limit the impact of the trade war on Canadian consumer prices. But firmer price growth among domestically produced and consumed services comes alongside a June labor market rebound, improved business sentiment, and resilient consumer spending trends.

While downside risks to economic growth persist, recent data is consistent with RBC's base-case view that Canada's central bank won't cut interest rates again this cycle, having opted to skip cuts at its last two meetings.

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