Canada's inflation rate unchanged in June at 2.2%
Last Updated: Wednesday, July 18, 2007 | 11:10 AM ET
CBC News
Canadians paid more for mortgage interest as the country's annual rate of inflation stayed steady at 2.2 per cent in June, the third month in a row it has remained unchanged.
Statistics Canada said Wednesday that for a third straight month, increased costs of home ownership pushed up the annual inflation rate. The overall cost of home ownership was up 4.9 per cent.
The cost of operating a vehicle also rose, climbing 2.8 per cent.
Statistics Canada said a 17 per cent drop in prices for computer equipment and supplies took out some of the sting of rising costs.
The Bank of Canada's core inflation index rose 2.5 per cent in June — faster than the 2.2 per cent increase observed in May — again, mainly because of the rise in homeowners' replacement costs.
The core index, which strips out several volatile factors, is used by the Bank of Canada to monitor the inflation control target. Increases in this index have exceeded two per cent for the past year.
Mortgage costs
Rising home ownership costs accounted for most of the increase in the annual inflation for a third consecutive month. Mortgage interest cost were the biggest contributor, rising 5.7 per cent, the same growth rate as in May and April. It was the fastest rate of growth since January 2001.
Homeowners' replacement costs, which represents the worn-out structural portion of housing and is estimated using new housing prices excluding land, rose by 6.1 per cent between June 2006 and June 2007. This was up slightly from the six per cent annual increase observed in May.
Drivers paid more for gasoline but the increase was not as pronounced as it was in May. The 12-month increase in pump prices in June was 1.7 per cent, compared with a 5.8 per cent increase for May 2006 to May 2007.
Economists don't see the Bank of Canada making snap decisions on interest rates based on Wednesday's report.
"The year-over-year comparisons get a bit friendlier for core [Consumer Price Index] in the next three months, and this may mark the high-water point for the time being on that front," said BMO Capital Markets economist Douglas Porter.
"So, even while core inflation has now matched its four-year high, the Bank of Canada is likely breathing just a wee bit easier today," he said in a commentary.
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