Analysts polled by Reuters had expected annual inflation to drop to 3.4% from 4.4% in April. Month over month, the consumer price index was up 0.4%, Statistics Canada said, a tick lower than forecasts for an increase of 0.5%.
Money markets see a 59% probability of a hike of 25 basis points on July 12, down from 64% before the release of the inflation figures. They see a 100% chance for a quarter-point move in September. The three-month annualized rates of the Bank of Canada's core measures "showed little progress toward bringing inflation to heel," said Royce Mendes, head of macro strategy at Desjardins Group.
Grocery prices also continued to surge, rising 9% year over year in May, nearly unchanged from the increases recorded in April.
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