Fuel prices boost Canadian inflation to 7.7%

• Consumer price index (CPI) at highest level since January 1983.
• CPI figures surpassed the average forecast of 7.4%.
• Bank of Canada will raise the benchmark interest rate by 0.75 percentage points

Canadian inflation has reached its highest level in 39 years, with annual price increases of 7.7% in May.

A variety of sectors contributed to the growth in the consumer price index, but energy prices stood out with a 34.8% year-over-year increase. The price of gasoline has increased by 48 percent, putting the financial strain on Canadian motorists. The CPI figures surpassed the average forecast of 7.4%.

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Excluding energy, the CPI grew by 6.3% during the past year. While a tight labour market has contributed to a 3.9% increase in hourly salaries, this increase has been exceeded by the 9.7% annual increase in grocery prices. The price of edible oils and fats has increased by 30%.

The year-over-year increase in lodging expenses was 7.4%, the same as in April. While home prices have lately decreased in the majority of cities, dramatically higher mortgage rates have pushed up the overall price of a property.

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The CPI is at its highest level since January 1983. The rise in Canadian inflation increases the likelihood that the Bank of Canada will raise the benchmark interest rate by 0.75 percentage points at its next meeting, in line with the Federal Reserve.