Ottawa Mortgage Blog

Canada’s annual inflation rate cooled in June, dropping to 2.7% after experiencing an uptick in May, where inflation increased to 2.9%. This latest figure came in below market expectations of 2.8%, indicating a potential positive shift in economic stability.

Mortgage interest cost remain a significant driver of inflation, showing a staggering increase of 22.3% compared to June 2023. This persistent rise underscores the ongoing challenges within the housing market and its impact on the overall inflation rate. Rent prices also continue to exert pressure on inflation, increasing by 8.8% year-over-year.

The combined effect of rising mortgage cost and rent underscores the critical role housing plays in the current inflationary landscape.

The June inflation figures are particularly noteworthy as they mark the sixth consecutive month that the inflation rate has remained within the Bank of Canada’s target range of 1-3%.

Economists argue that when mortgage interest cost are excluded from the inflation calculations, the rate of inflation falls well below 2%. This perspective highlights that the underlying inflation rate might be much lower than the headline figure suggests, further pointing towards a stable economic environment.

With clear signs that inflation is trending in the right direction and possibly even below the Bank of Canada's desired level, this scenario could provide the central bank with the confidence needed to continue cutting rates.