Gas Prices Push Canadian Inflation Rate to 3% in July

Canada's inflation rate rose to 3% in July due to a rebound in gas prices, despite some relief at the grocery store. The increase marks a rise from June's 2.8% inflation rate and comes as most economists had expected it to tick up to 2.9%. According to Statistics Canada, excluding gas, the consumer price index rose 2.2% for the third consecutive month.

The July rebound in gas prices was largely due to renewed hostilities between the US and Iran, which pushed global oil prices higher again. However, with progress on peace talks having cooled inflation sharply in June, StatCan noted that energy prices were still elevated. Higher jet fuel prices contributed to a 12% hike in airfares last month, up from 9.6% in June.

However, some cost pressures eased at the grocery store. Inflation for food bought from the store cooled to 3.1% in July, down from 3.9% in the previous month, driven by slower price hikes for fresh vegetables and chicken products, as well as lower prices for cereal products.

Economists Robert Kavcic of BMO and Andrew Grantham of CIBC both agree that despite some firmness in core inflation last month, the long-run annual rates remain near the Bank of Canada's 2% target. They predict the central bank will hold its benchmark interest rate steady at 2.25%, in line with their previous calls for no change until mid-2027.