Rapidly cooling housing market helps to quell Canadian inflation

Housing costs, and Canada’s unique way of capturing them in inflation, suggest that consumer price gains may slow rapidly in coming months.

As the largest expense for most households, shelter makes up 30 per cent of Canada’s consumer price index — a similar proportion to the U.S. But unlike its southern neighbor, Canada’s inflation metrics capture these costs in a way that’s more sensitive to changes in interest rates and home prices. 

That means Canadian inflation measures are influenced by both the rise in mortgage costs as the Bank of Canada aggressively raises rates and by the resulting slowdown in the housing market.