Canada's Inflation Outlook Remains Soft Amid Higher Gas Prices

Canada's inflation outlook is expected to remain soft in July, according to TD Securities' Robert Both. He forecasts that headline CPI will rise to 2.9% year-over-year, driven by higher gasoline and food prices. However, core measures of inflation, including the CPI-trim and CPI-median, are projected to stay muted at around 1.85%, below the Bank of Canada's forecasts.

The benign underlying inflation backdrop is expected to continue supporting a focus on core inflation rather than headline moves driven by oil prices. The July CPI report should confirm another stable month for underlying inflation pressures, with the ex-food/energy measure holding steady at 1.7% year-over-year.