Canada's Inflation Rate Rebounds but Trade Risks Remain

Canada's inflation rate rebounded in July after a volatile month for global energy prices. The annual rate of inflation rose to three per cent, up from 2.8 per cent in June and above economists' expectations. Global energy volatility was primarily responsible for the increase, with gas prices surging by 25.7 per cent year-over-year.

Randall Bartlett, deputy chief economist at Desjardins, noted that inflation is currently tracking below three per cent in August due to easing gas prices and other one-off pressures from earlier in the summer.

Bartlett emphasized that a sustained decline in global energy prices depends on fully restoring oil flows through the Strait of Hormuz. He attributed the current situation to ongoing tensions between President Trump and Iran, stating 'A big part of it is really up to President Trump and what's happening in the Middle East and the conflict with Iran.'

The Bank of Canada will consider these factors before its next interest rate decision on September 2. Economists believe that even though inflation is mild, trade risks remain a significant concern. BMO senior economist Robert Kavcic noted some firmness in core inflation measures last month but expects the central bank to keep interest rates steady.