Canada's consumer prices (CPI) are seen starting to ease as gasoline prices fall the most since the start of the pandemic, although underlying price pressures are likely to prompt the Bank of Canada to continue delivering aggressive rate hikes.
The consumer price index rose 7.6% in July from a year earlier based on a report released by Statistics Canada. Inflation readings in July rose just 0.1% from the previous month, the seventh consecutive increase.
Although annual inflation is likely to pick up, continued broad pressures could still prompt the central bank to make a 75 basis point increase in its key interest rate on September 7.
Bonds sold off, with the benchmark two-year yield rising more than 5 basis points to 3.293%. The Canadian dollar strengthened to C$1.2888 per U.S. dollar. from C$1.2904 before the report was issued.
Core inflation, which is seen as a better measure of price increases, rose to 5.3%, up from June's reading of 5.23%. Service inflation rose to 5.7%.
Tuesday's data was in line with the Bank of Canada's inflation estimate, which it sees averaging about 8% through the third quarter of 2022 before slowing.
Canadian and US inflation have risen almost in tandem. US inflation, reported last week, fell in July more than expected. The consumer price index rose 8.5% from a year earlier, lower than June's advance of 9.1%, while prices were unchanged from the previous month.
Similar to the US, falling gasoline prices in Canada were a major contributor to slow growth. The monthly drop of 9.2% was the biggest decline since April 2020, the statistics agency said.
