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Canada's CPI Likely Peaked in May, Core Inflation Seen Slowly Grinding Higher, UBS Says

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UBS said it continues to believe the Canadian headline consumer price index likely peaked annually at 3.2% in May as it takes into account Monday's CPI data for June.

The bank expects inflation to ease further over the remainder of the year, with headline CPI averaging 2.6% in 2026.

Core CPI is seen continuing to edge higher as demand gradually improves, according to UBS. Even so, the bank predicts underlying inflation to remain well contained, averaging around 2% throughout 2026.

For the Bank of Canada, the report reinforces that higher energy prices have yet to meaningfully feed into broader inflation, added UBS. With core inflation still below the 2% target, the bank continues to estimate that the BoC will leave rates unchanged for the rest of the year.

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