Canadian Dollar Sees Relief as Inflation Remains Near Target

The Canadian dollar received some relief as inflation remained steady near the target rate of 2% in July. According to Royal Bank of Canada (RBC) economists Abbey Xu and Nathan Janzen, the country's inflation rate increased to 3% year-over-year, largely due to higher energy costs.

However, underlying measures such as CPI-trim and CPI-median remained near the target, suggesting that the price increase was mainly driven by energy costs. RBC economists note that there is limited evidence of a significant pass-through from energy prices to broader prices.

In its July report, the Bank of Canada (BoC) is expected to keep interest rates unchanged through 2026, as inflation remains close to target and economic growth continues to firm up.