Tensions with Iran drive Canadian inflation to its highest level in 24 months

Canada's inflation rate surged to a 29-month high in May, primarily driven by soaring gasoline prices stemming from the Iran conflict, according to official data released on Monday, although there are indications that cost increases are beginning to slow down.

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The year-on-year inflation rate in Canada reached 3.2 percent in May, as reported by Statistics Canada, which attributed the upward pressure on gasoline prices to the closure of the Strait of Hormuz.

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Gasoline prices in May were 33.2 percent higher compared to the same period last year, as noted by the agency, highlighting the significant impact of the conflict on fuel costs.

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Despite the month's annualized inflation rate exceeding the Bank of Canada's target rate of two percent, experts do not see an immediate cause for concern regarding a broad-based increase in consumer costs.

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Senior TD Bank economist Leslie Preston observed that oil prices have dropped substantially since a tentative peace deal was reached between Iran and the US, and gasoline prices have followed a similar downward trend.

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Preston predicted that May would mark the peak for headline inflation this year, citing the decline in oil prices as a key factor in this forecast.

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The Bank of Canada has maintained its core interest rate at 2.25 percent for five consecutive announcements, as it navigates two conflicting forces: an economy hindered by US tariffs that may require a rate cut to stimulate growth, and inflationary pressure from the Middle East war that may necessitate a rate hike.