Inflation likely rose again in July, signalling new phase in Bank of Canada's fight
OTTAWA — Forecasters anticipate this week’s consumer price index report to show inflation rose last month, signalling a reversal in progress after a year of steady declines in inflation.
Canada’s annual inflation rate fell back to the country’s target range in June for the first time since March 2021, tumbling to 2.8 per cent.
But economists expected the victory against high inflation to be short-lived, as underlying price pressures suggest it will take some time for inflation to return to the two per cent target.
“I think (the report) is going to be a bit of a dash of reality for everyone, including the Bank of Canada, that basically the easy phase is over and now the hard work begins,” said Douglas Porter, Bank of Montreal’s chief economist.
Both BMO and Canadian Imperial Bank of Commerce expect inflation to come in at 3.1 per cent in July, largely due to higher gasoline prices.
The United States experienced a similar uptick in inflation last month, as its annual rate rose to 3.2 per cent, up from three per cent in June.
Porter said although lower gasoline prices have driven the decline in inflation over the last year, rising prices may start to add to inflationary pressures.
“Gasoline has very quickly gone from being a big drag on inflation to being close to neutral to possibly adding to inflation, again, is as early as next month’s report,” Porter said.
A rise in inflation in July’s report probably wouldn’t be a complete surprise to the Bank of Canada.
Its most recent forecasts show it’s expecting inflation to hover around three per cent over the next year before steadily declining to two per cent by mid-2025.
The central bank said the new projections pushed its governing council to hike rates again in July by a
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