Canada’s annual inflation rate accelerated to 3% in July, driven largely by another sharp increase in gasoline prices and higher travel costs, although a slower rise in grocery prices helped temper the overall gain.
Statistics Canada reported Monday that its Consumer Price Index increased from 2.8% in June. coming in slightly above expectations. Analysts surveyed by Reuters had forecast annual inflation of 2.9%. Consumer prices rose 0.5% from June, also exceeding the 0.4% monthly increase economists had expected.
Gasoline remained the biggest source of upward pressure, with prices jumping 25.7% from a year earlier in July, accelerating from a 20.5% increase in June. Renewed tensions between the U.S. and Iran have pushed energy costs higher. Prices for travel tours also contributed to inflation as Canadians paid more for U.S. hotels and flights, particularly to cities hosting World Cup matches, StatsCan said.
Food prices, however, provided some relief. Grocery prices increased 3.1% year over year in July, slowing notably from the 3.9% increase recorded in June. Even with that moderation, food purchased from stores has now risen faster than the overall inflation rate for 18 consecutive months, continuing to put pressure on household food budgets.
Shelter inflation remained relatively subdued, with costs including rent and mortgage interest rising 1.3% from a year earlier.
The increase in headline inflation had been widely anticipated because of higher energy prices, making underlying inflation measures particularly important for the Bank of Canada. CPI-trim held steady at 1.9%, while CPI-median edged up to 2% from 1.9% in June.
With those core inflation measures hovering around the Bank of Canada’s 2% target, economists generally expect the central bank to leave its policy interest rate unchanged through the remainder of the year.
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