Canada’s CPI index rose 2,5% on a year over year basis in June, following a 2.2% increase in May. This is the largest year over year increase in the CPI since Feb. 2012.

If we use the U.S. core inflation measure, which strips out food and energy prices, Canadian inflation was running at a 1.8% pace in June.

As the following chart illustrates, Canada’s CPI inflation rate has been gradually accelerating over the past year. The recent low in the CPI inflation rate was 1% in June of 2017.

As statistics in Canada indicates, the main factors driving the pick up in inflation relate to the improvement in the economy and the tightening of the labor market.

In addition, however, the increase in inflation also reflects increases in prices for gasoline and food. Indeed, there was a 24.6% y/y hike in gasoline prices as of June.

Canada’s CPI And The Services Component