Inflation Surge Won't Prompt Rate Hike, Economists Say

Canada's inflation rate ticked up to three per cent in July, but economists say it won't be enough to sway the Bank of Canada from its current interest rate stance.

The annual rate of inflation increased from 2.8 per cent in June, with global energy volatility being the primary culprit.

Gas prices surged by 25.7 per cent year-over-year, while travel tour costs accelerated sharply due to more expensive hotels and flights to US destination cities hosting FIFA World Cup games.

However, grocery store inflation cooled to 3.1 per cent in July, down from 3.9 per cent in the previous month.

Economists such as Randall Bartlett of Desjardins believe that a sustained decline in global energy prices is contingent on fully restoring oil flows through the Strait of Hormuz, a critical shipping lane for Gulf exports.

With trade risks looming and the Bank of Canada's next interest rate decision scheduled for September 2, markets are not expecting any changes to the current benchmark interest rate.