Canada's Inflation Rate Soared Higher In July, BoC's Follow-up Is In Question!

<p>&nbsp;Canada's annual inflation rate jumped higher than expected to 3.3% in July, but a measure of core inflation remained unchanged and grocery prices rose at the slowest rate since February 2022, Statistics Canada data showed on Tuesday.</p><p><br /></p><p>Analysts consulted by Reuters had forecast inflation to rise to 3.0% from a 27-month low of 2.8% recorded in June. Month-on-month, the consumer price index rose 0.6%, also higher than the expected increase of 0.3%.</p><p><br /></p><p>Although core inflation rose, the average of two of the Bank of Canada's core measures of core inflation, CPI-median and CPI-trim, stood at 3.65% compared to 3.70% in June.</p><p><br /></p><p>The central bank had predicted in July that inflation would be around 3% for about a year, before slowly falling to a target of 2% by mid-2025, partly because of excess demand.</p><p><br /></p><p><br /></p><p>Statscan said that the increase in headline inflation was mainly due to the base year effect on petrol prices, as the large monthly decline in July 2022 no longer affected the 12-month movement.</p><p><br /></p><p>Grocery prices grew at a rate of 8.5% in July, the lowest growth rate in more than a year, mainly due to the price of fresh fruit and, to a lesser extent, bakery products, Statscan said.</p><p><br /></p><p>Excluding food and energy, prices rose 3.4% compared to a 3.5% increase in June. Prices of services rose by 4.3% year-on-year in July, while prices of goods rose by 2.3%.</p><p><br /></p><p>After its last rate hike in July, the BoC said it would study the data carefully before taking any action. Second quarter Gross Domestic Product, which is expected to be released on September 1, will be taken into account before the BoC's next rate announcement on September 6.</p>