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Canada CPI accelerates to 3% in July as energy costs rise

Headline CPI climbed to 3.0% year over year, while core measures such as CPI excluding gasoline held at 2.2% but additional BoC gauges edged higher, tightening the case for higher underlying inflation.

Reported · Written up by our desk · Central Banks

Canada’s inflation accelerated more than expected in July, with headline CPI rising to 3.0% year over year from 2.8%, according to Action Forex. The report came in above the 2.9% consensus and also showed monthly CPI swinging to 0.5% from -0.4%, versus expectations for 0.4%.

Gasoline was the key driver, with annual price growth accelerating to 25.7% from 20.5% as energy costs rose amid the Middle East conflict, a Strait of Hormuz blockade, and disruptions that included partial closure of Red Sea shipping routes. Travel tour prices also contributed, while grocery inflation cooled enough to offset some of the increase.

Action Forex noted the release was not purely an energy story, because core inflation signals firmed alongside the headline pickup. CPI excluding gasoline held at 2.2% year over year for a third consecutive month, median CPI rose to 2.0% from 1.9%, trimmed CPI increased to 1.9% from 1.8%, and common CPI climbed to 2.7% from 2.6%.

With energy-driven headline inflation harder to “look through” when core measures rise together, the question for markets is whether higher energy costs feed into broader underlying prices or remain contained by softer domestic demand, Action Forex said. The Bank of Canada is still expected to weigh those second-round risks when deciding whether to maintain its extended hold.

Latest closeGasoline (RBOB) $2.901 ▼7.3%

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