© Reuters. FILE PHOTO: A sign is painted outside the Bank of Canada building in Ottawa, Ontario, Canada, May 23, 2017. REUTERS/Chris Wattie/File Photo
By Julie Gordon
Official data showed on Tuesday (Reuters) – Anada’s inflation rate eased slightly in July, as gasoline prices below food prices rose rapidly, but economists say core measures The heat suggests another rate hike is still on the way.
Statistics Canada data showed Canada’s inflation fell to 7.6% in July, in line with analyst forecasts and down from 8.1% in June. Month-on-month, the index rose 0.1%, again in line with forecasts.
“Canadians looking at today’s consumer price data will breathe a sigh of relief,” Royce Mendes, head of Macro Strategy at Desjardins Group, said in a note. “But this is not the time to be complacent.”
Mendes noted that gasoline prices, which rose 35.6% in July from 54.6% in June, contributed to a slowdown in year-on-year price growth, with food and demand-driven prices, such as travel flights and hotel rooms, still growing rapidly.
The overall CPI, which the central bank considers the best measure of economic activity, came in at 5.5% and June’s figure was revised sharply higher to 5.3%. The average CPI increased to 5.0% in July, while the CPI decreased slightly to 5.4%.
Jay Zhao-Murray, market analyst at Monex Canada, said the average of those three preferred measures was at a record high, suggesting the economy will face price pressures for months to come. .
“Good headline, bad story means in terms of profits, this report makes the Bank of Canada more likely to raise 75 bp (basis points),” Zhao-Murray said. “It turns out that the need for more destruction is needed to really bring down inflation.”
Hot inflation prompted the Bank of Canada to raise interest rates unexpectedly last month by 100 basis points. Inflation has been above the central bank’s 1-3% control range since April 2021.
The Canadian dollar was up 0.2% at 1.2882 against the greenback, or 77.63 US cents after the data.