Canada’s inflation climbs to 29‑month peak driven by rising oil costs

Petrol prices lead the surge with a 33.2 percent annual increase.

Published On 22 Jun 202622 Jun 2026

Canada’s annual inflation rate rose to a 29‑month high of 3.2 percent in May, as heightened oil prices stemming from US‑Iran tensions pushed petrol costs upward.

The data released by Statistics Canada on Monday marked the first time in roughly two and a half years that Canada’s headline inflation moved outside the Bank of Canada’s one‑to‑three percent target range.

Doug Porter, chief economist at BMO Capital Markets, told Reuters, “Seeing the overall inflation rate edge above three percent, even for just a month, is never welcome news.”

The monthly inflation rate jumped one percent in May, the largest gain in 15 months.

Petrol prices surged 33.2 percent year‑over‑year in May, the steepest increase since Russia’s invasion of Ukraine, according to Statistics Canada.

The rise fed into transportation costs, which climbed 9 percent versus the prior month.

Overall consumer prices increased 2.2 percent annually, driven by higher food, recreation, and alcoholic beverage expenses. Food prices rose 3.8 percent, with fresh fruit up 5.3 percent and vegetables up 9 percent.

The inflation figure is unlikely to shift the Bank of Canada’s view of underlying inflation, which earlier this month noted limited evidence that higher energy prices are feeding broad‑based price pressures.

Shelter costs edged up 1.7 percent in May, following a 1.8 percent rise in April, mainly due to a 0.2 percent dip in mortgage expenses.

The inflation spike arrives as rising living costs become a political challenge for Prime Minister Mark Carney, who promised to improve affordability after his party secured a parliamentary majority in April.

However, petrol prices are already reversing in June after an interim peace deal to end the US‑Israel conflict over Iran was signed between the United States and Iran last week, a development analysts say could ease the headline inflation figure in June.

Michael Davenport, senior Canada economist at Oxford Economics, noted in a statement to Al Jazeera, “The US‑Iran agreement to reopen the Strait of Hormuz has driven oil prices sharply lower in June, so May will likely represent the near‑term peak for headline inflation.” He added, “Still, considerable uncertainty surrounds the durability of the ceasefire, and the risk of a resurgence in oil prices remains elevated.”

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