Inflation likely gained pace in August, economists expect, reversing progress

financialpost.com:

OTTAWA — Economists are forecasting inflation reaccelerated to around four per cent last month, reversing previous progress made as gasoline prices push inflation higher.

Statistics Canada’s August consumer price index report set to be released Tuesday is expected to show the annual inflation rate rose for a second month in a row.

Canada’s inflation rate tumbled to 2.8 per cent in June, entering the Bank of Canada’s target range of one to three per cent for the first time since March 2021. The celebrations on reaching that benchmark were short-lived, however, as inflation ticked up the next month.

Desjardins’ managing director and head of macro strategy Royce Mendes said he expects headline inflation to come in at four per cent for August, up from 3.3 per cent in July.

“We’re expecting that the CPI data will reveal that Canadians’ pocketbooks were hit by higher prices, again, largely the result of gasoline prices,” Mendes said.

The price of oil rose steadily throughout the summer, surpassing US$90 a barrel this week. By comparison, June prices were hovering near US$70 a barrel.

Meanwhile, TD anticipates inflation rose to 3.8 per cent. Executive director of economics James Orlando said another factor likely contributing to higher inflation in August is the fact that inflation started to decline a year ago.

“We saw a decline in inflation last year, which means there’s going to be some base (year) effects that are going to play out to a higher inflation reading next week,” he said.

The Bank of Canada has kept the door open to more rate hikes in part because it expects getting inflation down to two per cent will take some time. But economists say the recent slack in the economy will likely convince the central bank to remain