FX.co ★ Canada Inflation Rises to Over 2-Year High

Canada’s headline inflation rate accelerated to 3.2% in May 2026, up from 2.8% in April, surpassing both market expectations of 3% and marking the highest rate since December 2023. The increase was driven primarily by a sharp rise in gasoline inflation, which jumped to 33.2% from 22.8% in April, as the war in the Middle East disrupted energy exports from a key producing region. This shock pushed overall energy costs in Canada up by 9%, compared with 7.6% in the previous month.

Food inflation also strengthened, rising to 3.8% from 3.5%, supported by a 5.3% increase in fresh fruit prices and a 9% gain in vegetable prices, in line with higher fertilizer costs. Despite these pressures, the Bank of Canada’s preferred underlying measures of inflation were stable, with the trimmed-mean core rate at 2% and the median core rate at 2.1%.

Inflation eased slightly in several categories: shelter inflation edged down to 1.7% from 1.8%, and health and personal care inflation slowed to 2.7% from 3.3%. Prices for household operations declined by 0.2% after a 0.4% increase in the prior month. On a monthly basis, the Canadian CPI rose 1% from April.