Skip to main content

Motorists pump gas at a gasoline station in Toronto in this file photo.

Fred Lum/Fred Lum/The Globe and Mail

The temperature wasn't the only thing on the rise last month. The price of gasoline, which tumbled in April, crept back up in May, likely pulling inflation with it.

Statistics Canada is widely expected to report a rise in the annual inflation rate last month of 0.9 to 1 per cent when it releases numbers on Friday.

That would put inflation back into the low end of the Bank of Canada's target range of between 1 per cent and 3 per cent.

Story continues below advertisement

This could mark the end of the downward pressure on inflation that characterized much of the past year, reaching a three-and-a-half-year low of 0.4 per cent, said Douglas Porter, chief economist at BMO Nesbitt Burns.

With a weaker Canadian dollar potentially easing some of the cross-border competition that has helped keep Canadian prices in check, Mr. Porter said he expects inflation to continue its upward trend in the coming months.

"Indeed, prices were very tame from May to July last year, suggesting that annual headline and core inflation will move higher into the summer," he said.

Although he is predicting inflation will rise, Mr. Porter doesn't anticipate it will spur any change by the Bank of Canada. The central bank's benchmark interest rate stands at 1 per cent, with no increase projected by economists until late next year at the earliest.

"The anticipated firmer reading will bring inflation back to the Bank of Canada's forecast for [the second quarter], though price pressures remain generally muted, leaving little need for the Bank to come off the sidelines," Mr. Porter said.

Gasoline prices are expected to be the biggest driver of inflation, having rebounded after falling 6 per cent in April in the biggest year-over-year decline since October, 2009. But they weren't the only category that saw a price jump last month.

"Recreation and health costs were likely tame, while other categories such as clothing and shelter got a boost – the latter from still-rising new house prices," said CIBC World Markets.

Story continues below advertisement

In fact, the core rate of inflation, which excludes volatile categories like energy, is expected to rise as well, said Mr. Porter.

"May is a seasonally strong month for prices (though they fell last year) and this year is no different, with higher gasoline prices among the items driving the headline increase. Core prices are expected to perk up as well, accelerating to 1.3 per cent year over year."

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter
To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies