Canada's Inflation Climbs to 3.3% in July

16 Aug, 2023

Canada's Inflation Climbs to 3.3% in July

Canada's inflation rate experienced an upturn, reaching 3.3 percent in July, according to the announcement from the government's statistical agency on Tuesday. This rise comes after a downturn from the peak recorded in June 2022 over the past year.

The increase in headline inflation, which experts had anticipated to be lower following a 2.8 percent price surge in June, was largely attributed by Statistics Canada to a base year impact concerning gasoline prices. The agency clarified that a substantial reduction in pump prices in July 2022 no longer influences the 12-month trend of the Consumer Price Index.

Furthermore, inflation was elevated last month due to a surge in energy prices in Alberta after the discontinuation of provincial rebates and a price cap.

Mortgage interest expenses saw a significant rise of 30.6 percent, marking another year-over-year increase. Meanwhile, travel costs saw a more gradual uptick, with hotel accommodation costs rising while airfare and prices for travel tours decreased.

Although the cost of groceries remained elevated, the increase was comparatively lower than in preceding months. Desjardins analyst Tiago Figueiredo noted that while July's inflation may have surpassed expectations, there are indications of progress beneath the surface.

Figueiredo further explained that the latest report could marginally tilt the balance of risks toward the possibility of a September rate hike. He emphasized, however, that recent weaker GDP and jobs data would also contribute to the overall analysis.

Anticipating the upcoming activity data, Figueiredo predicted that the Bank of Canada would maintain its key lending rate at 5.0 percent during its next meeting in early September.

Contrarily, CIBC's Katherine Judge projected a 25 basis point increment in the central bank's interest rate for the following month.