Canada's annual inflation rate hit 3.2 percent in May,highest in 29 months. Oil prices are soaring amid U.S.-Iran tensions, driving this surge. First time in over two years inflation's breached Bank of Canada's 1 to 3 percent target range.
Monthly inflation jumped 1 percent, steepest in 15 months. Gas prices spiked 33.2 percent year-on-year,largest since Ukraine conflict started. This fuel cost surge rippled through transport expenses,up 9 percent from previous month. Overall consumer prices rose 2.2 percent, pushed by pricier food, recreation,alcohol .
Food alone climbed 3.8 percent in May. Fresh fruit shot up 5.3 percent,vegetables soared 9 percent . Yet Bank of Canada unlikely to change stance on underlying inflation. They’ve said rising energy costs aren't broadly inflating prices.
Housing saw shelter costs up 1.7 percent in May,after 1.8 percent rise in April. A slight dip in mortgage costs,down 0.2 percent,partly offset this. Rising living costs pose tough spot for Prime Minister Mark Carney,who pledged to tackle affordability after April's parliamentary majority win.
But gas prices already reversing in June,following U.S.-Iran interim peace deal. Analysts say this could ease inflation pressure soon. Michael Davenport,senior economist at Oxford Economics,said reopening Strait of Hormuz—key oil route—has sharply cut oil prices this month.
“May likely marks near-term peak for headline inflation,” Davenport said. Ceasefire's uncertain,oil prices could climb again .
The situation's fluid,renewed oil price volatility still a risk. As Canada faces these economic hurdles,impact of rising inflation will be under close watch…
