OTTAWA — Soaring gas prices helped the annual inflation rate in May soar to its highest level in nearly 40 years, as the rising cost of living for Canadians squeezed household budgets and bolstered expectations the Bank of Canada will opt for a supersized interest rate hike next month.
Statistics Canada said Wednesday its consumer price index in May rose 7.7% compared with a year ago, the fastest pace since January 1983 when it gained 8.2%. That’s up almost a percentage point from April’s 6.8% gain.
TD Bank managing director Leslie Preston said a generation of Canadians is experiencing high inflation for the first time.
“If you aren’t over 40, you have never lived through inflation like this, and unfortunately, we are not expecting much of a reprieve going forward,” Preston wrote in a report.
The May reading came as energy prices rose 34.8% compared with a year ago with gasoline prices up 48% compared with a year ago. Excluding gasoline, the annual inflation rate in May rose to 6.3% compared with 5.8% in April.
The Bank of Canada has raised its key interest rate target three times so far this year to bring it to 1.5% in an effort to bring inflation under control.
It has also said it is prepared to is prepared to “act more forcefully” if needed, leading to speculation by economists that it could raise rates by three-quarters of a percentage point next month, matching a move by the U.S. Federal Reserve last week.
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