Canada’s consumer price index (CPI) increased 3.2% year-on-year in May 2026, marking the highest annual inflation rate since December 2023, according to Statistics Canada data released today [1, 2, 3]. This is the first time in nearly two and a half years the inflation rate has risen above the Bank of Canada’s target range of 1% to 3% [2].

Monthly inflation in May jumped 1%, the largest monthly increase in 15 months. The surge was driven mainly by gasoline prices, which rose approximately 33% year-on-year due to heightened oil prices amid US-Iran tensions [2, 3]. Food prices also contributed to the increase, rising 3.8% year-on-year, led by a 5.3% rise in fresh fruit and 9% gain in vegetable prices [2, 3].

Shelter inflation eased slightly to 1.7% in May from 1.8% the previous month, helped by a 0.2% decline in mortgage costs [2, 3]. Meanwhile, the Bank of Canada’s preferred core inflation measures remained stable at 2.1%, indicating underlying inflation pressures stayed more contained [2, 3].

Inflation pressures became less broad-based, with 35% of goods and services rising at or above a 3% annual pace in May. This is down from 45% in December 2025 [3]. By province, inflation rates were 2.6% in Ontario, 3.6% in Quebec, and 3.7% in Alberta [3].

BMO Capital Markets chief economist Doug Porter said, "It’s never good news to see the overall inflation rate track above three percent, even if it is for one month only" [2].

Prime Minister Mark Carney faces rising political pressure as Canadians grapple with higher living costs amid the inflation surge [2]. The spike in gasoline prices is expected to ease after an interim peace deal was signed mid-June between the US and Iran, which could calm oil market tensions [2]. Petrol prices showed early signs of reversal in June, suggesting a possible easing of inflation pressures in the coming months.

Statistics Canada’s May data released today underscores a key challenge for policymakers wrestling with inflation above target. The Bank of Canada will monitor these developments closely as they consider their next move.