Canada’s

inflation rate

accelerated to 1.9 per cent in June, up from 1.7 per cent the previous month, as disruptions to global trade started to have an impact on consumer prices.

Prices increased in seven major components of the consumer price index basket, while gasoline prices fell to a lesser extent than in May, driving the overall rise in inflation,

Statistics Canada said on Tuesday

. Excluding energy, the consumer price index rose by 2.7 per cent in June.

Tuesday’s inflation reading is the last major economic data release before the

Bank of Canada

‘s next interest rate decision on July 30. The central bank decided to pause its policy rate at its last two meetings in April and June.

Core inflation, the measures it prefers to look at when making its monetary policy decisions, remained elevated near three per cent.

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Year-over-year, CPI-common rose by 2.6 per cent in June, the same as the previous month. CPI-median increased by 3.1 per cent, up from three per cent in May and CPI-trim rose by three per cent, the same as in May.

United States President

Donald Trump’s trade war

continues to be the biggest source of uncertainty for businesses and policymakers. Sectoral tariffs remain in place for some Canadian industries, including 50-per-cent tariffs on Canadian steel and aluminum, and a 25-per-cent levy on Canadian autos. Trump threatened a 50-per-cent tariff

on copper

last week.

Trump has also increased pressure on America’s trading partners, sending letters to leaders from several countries last week informing them of “reciprocal” tariffs the U.S. plans to impose effective Aug. 1. Canada is set to be hit with a 35-per-cent tariff, while negotiations remain ongoing between the federal government and the U.S. administration to reach an economic and security deal by the end of the month.

In a speech last month, Bank of Canada governor

Tiff Macklem

warned consumer prices would rise if there is no deal reached to remove tariffs. Economists expect the central bank to remain on the sidelines at its next meeting, as the labour market also showed resilience in June, with the

unemployment rate ticking down

to 6.9 per cent and the economy adding 83,000 jobs.

“Healthy core price growth, coupled with last week’s surprisingly robust employment gains now make a July cut from the Bank of Canada unlikely,” said Toronto-Dominion Bank senior economist Andrew Hencic, in a note to clients. “However, renewed trade threats add to the uncertainty that has lingered over the economy since the start of the year.”

Hencic added that if no trade deal is reached with the U.S., then the economic backdrop may force the central bank to start cutting interest rates again later this year.

Prices for durable goods rose by 2.7 per cent last month, up from two per cent in May. Canadians paid more for passenger vehicles and furniture last month, as prices accelerated faster in both those categories.

Prices for clothing and footwear rose by two per cent last month, after increasing by 0.5 per cent in May.

“Uncertainty surrounding international trade put upward pressure on prices for clothing and footwear in June, as the industry faced higher costs in the wake of tariffs,” Statistics Canada said.

Rental prices were up 4.7 per cent compared to the same time last year and mortgage interest rate costs were up 5.6 per cent.

“While shelter costs are helping out in terms of dampening the inflation trend, there has been a surprising, and disturbing, uptrend across a host of products from vehicles to furniture, despite the recent strength in the Canadian dollar and a rather circumspect demand picture,” said David Rosenberg, founder and president of Rosenberg Research & Associates Inc., in a note. “Could it be that goods producers are taking advantage of the heightened inflation fear by passing on price increases?”

Prices for food purchased in stores rose 2.8 per cent year-over-year last month, down from a 3.3 per cent increase in May. The decline was driven by a drop in prices for fresh vegetables, with cucumbers declining by 18.3 per cent and onions declining by 10.3 per cent.

• Email: jgowling@postmedia.com

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