OTTAWA (Reuters) – Canada’s annual inflation rate surged more than expected to 3.3% in July, but core inflation measures were essentially unchanged and grocery prices increased at the slowest pace since February 2022, Statistics Canada data showed on Tuesday.
Analysts polled by Reuters had forecast inflation to rise to 3.0% from the 27-month low of 2.8% recorded in June. Month-over-month, the consumer price index was up 0.6%, also higher than a forecast of a 0.3% gain.
While headline inflation accelerated, the average of two of the Bank of Canada’s core measures of underlying inflation, CPI-median and CPI-trim, came in at 3.65% compared with 3.70% in June.
The central bank projected in July that inflation would hover around 3% for about a year, before creeping down to its 2% target by mid-2025, in part due to excess demand.
Statscan said the rise in headline inflation was mainly attributable to a base-year effect in gasoline prices, as a large monthly decline in July 2022 was no longer impacting the 12-month movement.
Grocery prices grew at 8.5% in July, slowest pace in more than a year, mainly due to prices for fresh fruit and to a lesser extent, bakery products, Statscan said.
Excluding food and energy, prices rose 3.4% compared with a 3.5% rise in June. Services prices rose 4.3% annually in July, while the price of goods increased by 2.3%.
The BoC, after its last rate hike in July, said it would study data closely before moving again. It will have second quarter GDP data, due on Sept. 1, to take into account before the next rate announcement on Sept. 6.
(Reporting by Ismail Shakil in Ottawa; Editing by Dale Smith)
