How close is Canadian inflation to the 2% target?

Headline inflation fell back to 2.8% year-over-year in June from 3.2% in May. That returns the headline inside the Bank of Canada's 1-to-3% control band after a single month above it. The reversal is concentrated in gasoline, which fell after an interim Middle East ceasefire eased pressure at the pump — an energy correction, not yet evidence of a broader disinflation.

CPI-trim eased to 1.8% in June and CPI-median eased to 1.9%, both down two-tenths from May and now below the Bank of Canada's 2% midpoint. Neither preferred-core measure confirmed May's headline breakout, so June's reversal matches what the underlying trend had been saying. The policy question shifts from whether the overshoot would spread to whether energy has further to give back.

The share of the CPI basket running above 3% year-over-year fell to 28.8% in June from 34.6% in May. The share running below 1% jumped to 43.2% from 34.9% — June's cooling reached beyond components merely running hot. May's widening looks like the energy-driven blip it appeared to be, not the start of a broader breakout.

Energy inflation collapsed to 14.3% year-over-year in June from 22.2% in May as gasoline reversed, and goods inflation eased to 3.5% from 4.8%. Services excluding shelter accelerated to 3.0% from 2.3%, with World Cup-related travel demand pushing hotel, rental-car, and tour prices higher in Ontario and British Columbia. Shelter and food both eased slightly, and June's story is a rotation — energy giving back its spring, services picking up the slack — not a uniform cooling.

Five-year consumer expectations rose to 3.4% from 3.0%, and the share of firms expecting inflation above 3% jumped to 44% from 11% — the highest reading since late 2023. Both surveys were fielded in late April and May, as the war drove WTI crude toward $101 a barrel, up from roughly $65 before the conflict began, and nearly three-quarters of firms reported the war had already raised their costs. June's CPI print cooled to 2.8% after both surveys had closed: the backward-looking data eased while the forward-looking readings turned more worried.