Canadian CPI rises to 1.9% in June

The Trump tariff effect is increasingly cropping up in the Canadian cost of living, according to the latest inflation numbers.

As reported by Statistics Canada, the Consumer Price Index (CPI) rose by 1.9% year over year in June, compared to two consecutive increases of 1.7% in May and April. On a monthly basis, the measure is up by 0.1%.

While there were price drops in some key consumer categories, including food and energy costs (removing them from the equation would lead to an inflation number of 2.6%), the headline number was propped up by a rise in passenger vehicle prices – an industry heavily affected by a 25% import tariff imposed by the US.

Overall, auto prices rose 4.1% in June, on  top of a 3.2% increase recorded in May. Used vehicles specifically rose 1.7% after dropping 0.1% last month, largely due to a tighter supply of vehicles for sale. This is the first price increase in 18 months, says StatCan. Brand-new vehicle prices, meanwhile, rose by 5.2%, compared to 4.9% the previous month.

Rising prices have also made it pricer to insure a vehicle, with passenger vehicle insurance premiums rising by 7.2% in June. This is typical when auto prices rise says Matt Hands, VP of Insurance at Ratehub.ca.

“Insurance premiums typically rise with newer, more expensive vehicles due to several cost factors that insurers must account for when calculating risk. For instance, newer cars and electric vehicles are usually equipped with advanced technology, sensors, and specialized parts that can significantly increase both repair costs and total replacement expenses, making insurers charge higher premiums to cover these increased payouts," he says.

“Additionally, certain popular models may face higher theft rates, which insurers must also factor into their pricing. That said, newer vehicles with advanced safety features can sometimes qualify for discounts”.

Gas and grocery costs continue to decline

However, consumers continue to see some relief at the gas pump, down 13.4%, though that drop is smaller than the 1.5% recorded in May. Overall energy costs, meanwhile, ticked up by 2.7%, as the effects of the consumer carbon tax removal, which occurred in April, started to fade.

Canadian dollars are also stretching further at the grocery store, as food prices rose at a slower pace than in May, at 2.8% compared to 3.3%. This was largely due to a drop in fresh vegetable prices, which fell 3.1% year over year, says StatCan, which adds that this decline was the first since October 2021 and was driven by lower prices for onions (-10.3%) and cucumbers (-18.3%). Food purchased in restaurants also dipped slightly, at 3.2% compared to 3.3% in May.However, food costs continue to outpace the overall rate of inflation.

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Lower mortgage rates lead to cooler shelter costs

Canadians are also paying slightly less for housing; the shelter component declined further, to 2.9%, compared to 3% in May and 3.4% in April. While rent costs ticked up slightly, rising 4.6% compared to 4.5%, mortgage interest costs fell for the 22nd consecutive month, coming in at 5.6%, compared to 6.2% in May.

This continues to reflect the impact of the Bank of Canada’s rate cutting cycle, which took place between June 2024 and March 2025; the series of seven cuts ultimately brought the central bank’s trend-setting overnight lending rate – which sets the cost of lenders’ prime rates and variable mortgage rates – down to 2.75% from its previous high of 5%. Variable mortgage rates fell by the same margin, with the lowest five-year term now at 3.95%.

Fixed mortgage rates, while not directly affected by the BoC’s rate, also dropped over this time frame in accordance with falling bond yields. Overall, today’s mortgage rates remain below where they were during the summer of 2024, leading to the lower base-year effect in the shelter component.

Stubborn core inflation puts rate cuts on ice

It’s increasingly unlikely that we’ll see further rate reductions from the BoC this summer; the June inflation report shows that the “core” measures of the CPI aren’t progressing as hoped. These measures, called the CPI Median and Trim, effectively remove extreme price swings from the CPI basket, offering a more accurate look at how prices are trending. They are closely monitored by the central bank, and are a key consideration in their interest rate decisions.

In June, the CPI Median increased to 3.1% (up from 3% in May), while the Trim remained unchanged at 3%. Combined with the stronger-than-expected jobs report out this month, this will strongly dissuade the BoC from passing along another cut in the near future. The Bank will also be closely watching how Trump’s most recent threat to impose a 35% tariff on all Canadian goods will pan out; they won’t be rash to heap on stimulus too soon, if deeper risks are present down the road.

The central bank will also be feeling inflation pressures from south of the border; the US CPI report, also out today, revealed American inflation rose by 2.7% in June, largely reflecting the impact of tariffs. That’s the highest level since February, and will similarly discourage the US Federal Reserve from passing along lower interest rates in the coming months, despite pressure from the US President to do so.

Overall, consumers can expect little in terms of rate relief in the coming months, while the cost of goods is set to tick higher.

Also read:

• What the 25% US auto tariffs mean for vehicle prices in Canada
• What is the Bank of Canada’s overnight lending rate?
• May 2025 CPI remains stable at 1.7%
• Inflation and the Consumer Price Index in Canada