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Breaking: Canada's headline CPI rose by 2.8% YoY in June

Canada’s inflation has cooled a tad in June, with the Consumer Price Index (CPI) rising 2.8% from a year earlier, coming in below market expectations and down from the 3.2% increase recorded in May. On a monthly basis, prices declined by 0.4%.

Meanwhile, the Bank of Canada’s (BoC) preferred core measure, which excludes more volatile components such as food and energy, rose 2.1% over the past year and increased by 0.1% compared with the previous month

Looking at the BoC’s other key inflation gauges, Common CPI came in at 2.6% (from 2.7%), Trimmed CPI at 1.8% (from 2.0%), and Median CPI at 1.9% (from 2.1%). Together, they show that underlying price pressures seem to have resumed the downtrend.

According to the press release, "Prices for gasoline increased at a slower rate on a year-over-year basis in June compared with May, driving the deceleration in the headline CPI. Excluding gasoline, the CPI was unchanged in June compared with May, at 2.2%... The CPI fell 0.4% month over month in June, the largest monthly decline since December 2024. On a seasonally adjusted monthly basis, the CPI fell 0.1% in June, the first decline since April 2025 (-0.2%).”

Market reaction

The Canadian Dollar (CAD) trades on the back foot on Monday, motivating USD/CAD to revisit the 1.4050 zone, reversing at the same time part of the severe pullback in place since the beginning of the month.

Inflation FAQs

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

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FXStreet Team

Composed of a group of economic journalists and FX experts, the FXStreet content team produces and oversees all content published on FXStreet. It provides a purely journalistic approach to the Forex market.

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