Inflation Rises To 2.5% In June…The Highest Since 2012

Statistics Canada recently reported that Canada’s annual inflation rate rose to 2.5% in June. In addition, consumer prices grew faster than in the previous six years. 

The latest inflation number resulted in higher energy prices, particularly gas and fuel oil. Other contributors behind last month’s stronger inflation figure were more expensive airline tickets (fuel-related), restaurant costs and higher mortgage costs. Downward pressure on prices last month was led by reduced costs for telephone services, travel tours and digital equipment and devices.

The June pace lifted inflation to its highest point since February 2012 when it was 2.6%. This also moved the number farther away from the 2% mid-point of the Bank of Canada’s target range. The central bank had been anticipating inflation to gradually rise but it is expected to come back down to 2% in the second half of 2019.

The Bank of Canada uses interest rate hikes, such as those on mortgage and lending rates, to help prevent inflation from climbing too high. It tries to keep inflation within a range of between 1% and 3%. The latest interest rate hike means increased borrowing costs for consumers with variable-rate mortgages, loans or lines of credit. On the flip side, it is also good news for savers and future homeowners.

Higher interest rates help seniors and those that rely on interest income to help fund their retirement costs. These rate hikes also keep us focused on the need to pay down debt and curb spending.

Vera Vlaovich is a Financial Advisor with RGF Integrated Wealth Management. The views expressed are those of the author and not necessarily those of RGF Integrated Wealth Management, which makes no representations as to their completeness or accuracy.

© 2018  RGF Integrated Wealth Management. Ltd., RGF Wealth Management. Ltd., Member - Canadian Investor Protection Fund 

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