Canada's Inflation Hits 3% as Gas Prices Soar

Canada's annual inflation rate accelerated to 3% in July, slightly more than expected. The renewed United States-Iran tensions drove gasoline prices higher, while travel tour costs also rose. On a monthly basis, the consumer price index (CPI) rose by 0.5%, driven by an increase in gasoline costs.

The inflation rate now sits at the ceiling of the Bank of Canada's 1% to 3% control range. Analysts had projected consumer prices to rise 2.9% annually and 0.4% on a monthly basis in July, but actual numbers were higher.

Core inflation measures CPI-trim and CPI-median came at 1.9% and 2% respectively, both at the same level as the prior month. Economists say this means the Bank of Canada is likely to keep its key policy rate on hold for the rest of the year.

Gasoline prices accelerated by 25.7% in July against an increase of 20.5% in June, while travel tour costs also contributed to the yearly rise. However, a slower rise in grocery prices moderated the CPI, with food purchased from stores rising by 3.1% in July.

Shelter costs continued to be subdued, with a 1.3% increase in July. The Canadian dollar firmed slightly after the data, trading up 0.17% to C$1.3851 against the U.S. dollar.