While inflation remained flat at 1.7 per cent for the month of May, Canadians still spent more last month at the grocery store for their rent and utilities. If you’re in the market to purchase a new vehicle, prices accelerated by 4.9 per cent, food at the grocery store increased 3.3 per cent and shelter costs ticked up three per cent. “The underlying measures, they’re still running at around three per cent on a yearly basis and that’s outside the Bank of Canada’s comfort zone” Sal Guatieri, BMO capital markets senior economist, told CTV News. Guatieri adds that food and vehicle prices could be rising in part due to Canada’s counter tariffs on the United States. “The only things that are really falling (in price) right now are gasoline prices. We’re seeing a lot of help there,” Guatieri said. “They’re down 16 per cent in the past year, and clothing prices are down on a yearly basis.” Though the current volatility in oil prices is a concern, the war between Iran and Israel has the potential to reach into the wallets of Canadians. Iranian officials have threatened to cut off access to the Straight of Hormuz, a key shipping route for oil and gas. The waterway, located between the Persian Gulf and the Gulf of Oman, is just 33 kilometres wide at its narrowest point, which requires oil tankers to pass through both Iranian and Omani territorial waters. John Manley, Canada’s former deputy prime minister, says any spike in oil prices “leads to disruption in other markets.” “Oil is fundamental to many, many markets. Prices go up and it will cause inflation, so the events in the Middle East are of concern,” Manley said. Twenty million barrels of oil travel through the Strait of Hormuz each day, which makes up 20 per cent of global oil production. The passage is the only route to ship crude out of the oil-rich Persian Gulf to the rest of the world, and Iran controls the northern portion of the waterway. Queens University economist Don Drummond says there is speculation “the price of oil could double to $150 a barrel.” “If that happens you can add about 1.5 per cent to inflation,” Drummond said. “This would lower growth even more and increase inflation.” Since the latest conflict between Israel and Iran began, oil prices have come back down after spiking during the first week. What happens in the days ahead could be part of the Bank of Canada’s calculation, as a potential rate cut could come in the next scheduled announcement on July 30.
