Canada’s annual inflation rate remained flat at 1.7 per cent in May, according to the latest data from Statistics Canada released Tuesday. Economists say Bank of Canada (BoC) policymakers will likely need to see more convincing data to justify a rate cut on July 30.

“The quick take on this overall result would be: Not bad, but should do better to convince the Bank to trim rates further,” BMO chief economist Doug Porter wrote to clients on Tuesday morning. “The data over the next five weeks will ultimately drive the decision, but the odds of a July cut are lower now on the so-so CPI.”

Statistics Canada says a smaller price increase for rent and a decline in travel tours put downward pressure on prices, while smaller price dips for gasoline and cell phone service blunted the overall decline.

On a monthly basis, the Consumer Price Index (CPI) rose 0.6 per cent last month. On a seasonally adjusted monthly basis, CPI was up 0.2 per cent.

StatCan says shelter costs rose three per cent year-over-year in May, following a 3.4 per cent increase in April. Rent rose 4.5 per cent on an annualized basis last month, a slowdown from a 5.2 per cent gain in April. The slowdown in rising rents was most significant in Ontario, where prices rose three per cent in May, after a 5.4 per cent jump in April.

“The increased availability of rental units, coupled with slower population growth compared with spring of the previous year, contributed to the slowdown in rent price growth in May,” StatCan wrote on Tuesday. “Given the large weight of Ontario nationally, these effects alone were enough to offset faster price growth in seven other provinces.”

TD Bank senior economist Andrew Hencic wrote in a research note on Tuesday that ongoing challenges in Canada’s housing market, particularly in Ontario, should help limit further rent price gains in the coming months.

For homeowners, the mortgage interest cost index fell for the 21st consecutive month in May, dropping from 6.8 per cent in April to 6.2 per cent in May.

Meanwhile, price breaks at the gas pumps led consumer energy prices lower for another month, falling 15.5 per cent year-over-year in May, versus a 18.1 per cent drop in April. StatCan says May gasoline prices are down year-over-year due in large part to the removal of the federal government’s consumer carbon tax, and corresponding provincial levies.

StatCan’s core measures inflation, a key gauge for the Bank of Canada, edged down slightly in May. CPI-median and CPI-trim each slowed to 3.0 per cent year-over-year, from 3.1 per cent in April.