Canada’s annual inflation rate inched up to 1.9% in June, rising from 1.7% in May, according to data released Tuesday by Statistics Canada.

The increase, driven largely by rising prices in durable goods, reinforces the Bank of Canada’s cautious stance as core inflation remains above its 2% target. Markets had widely expected the uptick, but the underlying data suggests policymakers may delay any near-term interest rate cuts.

“The breadth of inflation showed no real improvement, so the quick read is that the overall report really gives the Bank of Canada no opening to cut interest rates at the upcoming meeting on July 30,” Doug Porter, chief economist at BMO Capital Markets, wrote in a note to clients.

While headline inflation remains relatively tame, core measures continue to signal persistent price pressures. CPI Median rose to 3.1%, while CPI Trim held steady at 3%, both well above the central bank’s comfort zone. Those numbers suggest underlying inflation dynamics remain sticky, even as volatile categories such as energy and food moderate.

Durable goods contributed to the inflationary pressure, with vehicle prices up more than 4% year-over-year, and clothing and footwear not far behind. Rental costs accelerated to 4.7% from a year earlier, and were the biggest contributor to inflation given the components’ large weight in the index, according to Porter.

On the other hand, gasoline prices dropped by 13.4%, continuing their downward trend and helping to offset some of the broader inflation gains.

This morning’s release comes on the heels of robust employment figures in June, which showed a net gain of 83,000 jobs, further complicating the outlook for rate cuts. Combined with lingering trade uncertainty and tight labor conditions, the inflation data has led traders to slash the odds of a July interest rate cut to just 10%, down from 30% earlier this month, according to overnight index swap markets.

“Today's result gives the Bank of Canada almost nothing to justify a rate cut in July,” Porter wrote. “If the solid employment report was the icing on the cake for that decision, this is the cherry on top. Simply put, underlying inflation remains stubbornly strong.”

Porter said the central bank would need to see a “material deceleration” in core inflation to seriously consider cutting rates, even at the September meeting, “barring a steep deterioration in the economy (which can't be ruled out with the ongoing tariff uncertainty).”

Governor Tiff Macklem has emphasized that the Bank of Canada will require clear and sustained evidence of inflation nearing 2% before moving to ease. For now, the data points to a holding pattern — one that could extend well into the fall.