TORONTO (Reuters) - Canada's annual inflation rate unexpectedly accelerated to 2.9% in May, largely on higher prices for services, while key measures of core inflation edged up for the first time in five months, data showed on Tuesday, in an unfavorable reading for July interest rate cut prospects.
Analysts polled by Reuters had forecast inflation to cool to 2.6% from 2.7% in April. Month-over-month, the consumer price index was up 0.6%, exceeding a 0.3% rise forecast.
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COMMENTARY
DOUG PORTER, CHIEF ECONOMIST AT BMO CAPITAL MARKETS
"For the first time in 2024 we've got a disappointing inflation report on our hands. I wouldn't say it's terrible, but it's certainly higher than expected. It seems to be pretty broad-based... This definitely reduces the chances that the Bank of Canada will cut in July. It's not ruled out, we do get another inflation reading before then. But it doesn't help."
"The good news is that on all the core measures, the headline figure is below 3%. But it's definitely a step in the wrong direction."
(Reporting by Maria Sheahan; Editing by Fergal Smith and Tomasz Janowski)
