Inflation Is Looking Better... But I'm Not Ready to Celebrate Yet

If you've been watching mortgage rates or wondering what the Bank of Canada might do next, today's inflation report is worth paying attention to.

At first glance, the numbers look encouraging. Canada's annual inflation rate dropped to 2.8% in June 2026, down from 3.2% in May and slightly better than economists were expecting. That's welcome news for borrowers, homeowners, and anyone hoping interest rates continue to

The bond market seemed to like the report too. Shortly after the release, Canada's 5-year bond yield moved lower, which is important because fixed mortgage rates are heavily influenced by bond yields. While there are always other factors at play—especially movements in the U.S. bond market—this is a positive sign.

What's Driving Inflation Lower?

A few key factors helped bring inflation down in June:

• Gasoline prices weren't rising nearly as quickly as they were the month before.

• Food inflation eased slightly, including slower price increases at grocery stores.

• Shelter costs continued to cool.

• Health and personal care inflation also moderated.

Perhaps even more encouraging is what happened with core inflation.

Core inflation removes some of the more volatile price categories and gives the Bank of Canada a better picture of underlying inflation pressures.

In June:

• CPI Median fell to 1.9%

• CPI Trimmed Mean fell to 1.8%

These are the lowest readings we've seen in more than five years and suggest that inflation pressures across the broader economy are continuing to ease.

Why This Matters for Mortgage Rates

As a mortgage broker, I watch inflation reports closely because they help shape what happens next with interest rates.

The Bank of Canada has been working toward its 2% inflation target, and while we're not quite there yet, today's report shows we're moving in the right direction.

When inflation cools and core inflation remains under control, it gives the Bank of Canada more confidence that its current policy is working. It also helps support stable or even lower bond yields, which can create opportunities for fixed mortgage rates to improve.

But Here's Why I'm Still Watching Carefully

While today's report is encouraging, I don't think it's time to declare victory just yet.

One of the biggest reasons inflation eased in June was lower energy prices.

That decline was largely driven by a temporary easing of tensions in the Middle East following a Memorandum of Understanding between the United States and Iran.

Oil prices responded quickly, falling from roughly $95 per barrel in early June to below $70 per barrel by the end of the month.

Unfortunately, that relief didn't last.

Since early July, geopolitical tensions have increased again, and oil prices have climbed back above $80 per barrel, sitting around $82 per barrel at the time of writing.

Higher oil prices don't just affect what we pay at the gas pump. They increase transportation costs, manufacturing costs, and shipping expenses, which can eventually work their way into the prices of many everyday goods and services.

That's why I'll be watching the next few inflation reports very closely.

My Bottom Line

Today's inflation report is definitely encouraging.

The headline number came in lower than expected, core inflation continues to soften, and the bond market reacted positively. Those are all signs that Canada's inflation story is moving in the right direction.

At the same time, inflation isn't just about today's numbers. Global events—especially changes in energy prices—can quickly change the outlook.

If oil prices remain elevated, we could see inflation begin to creep higher again over the coming months.

For anyone with a mortgage coming up for renewal, considering buying a home, or wondering whether to choose a fixed or variable rate, this is exactly why it's important to look beyond the headlines.

Every inflation report tells part of the story—but it's the trend over time that really matters.

Ready to chat about your goals? Visit www.emilycallme.com

Emily Miszk Mortgage Broker BRX Mortgage FSRA #13463