By Randy Thanthong-Knight
(Bloomberg) — Canadian consumer prices moderated slightly and underlying pressures broadly eased.
The consumer price index rose 1.7% from a year ago in July, down from June’s 1.9% increase, Statistics Canada data showed Tuesday. That was slower than the median projection in a Bloomberg survey of economists. The index increased 0.3% on a monthly basis, matching economist expectations.
July’s deceleration was led by gasoline prices, which fell 16.1% from a year earlier, reflecting the removal of the consumer carbon tax. Prices also fell 0.7% on the month, due to the Iran-Israel ceasefire as well as increased supply from producing countries. Excluding gasoline, the index rose 2.5%, matching increases in May and June.
The loonie extended the day’s losses versus the U.S. dollar after the inflation report and traded around $1.3825 as of 8:34 a.m. in Ottawa. Canadian debt edged higher across the curve, with the two-year yield slipping to 2.73%.
A range of underlying price pressures showed conflicting signals. The average of the Bank of Canada’s two preferred core measures accelerated slightly, rising 3.05% and up from 3% in June. But the three-month moving average of the core rates slowed to 2.43%, from 3.39% previously.
CPI excluding taxes eased to 2.3%, while CPI excluding shelter slowed to 1.2%. CPI excluding food and energy dropped to 2.5%, and CPI excluding eight volatile components and indirect taxes fell to 2.6%. The share of components with the consumer price index basket that are rising 3% and higher — another key metric that the bank’s policymakers are watching closely — shrank to 37.3%, from 39.1% in June.
With July’s consumer-price data painting a mixed picture, the next inflation report — due a day before the next rate decision on Sept. 17 — will likely become more important for policymakers who are mulling whether to reduce the policy interest rate, after keeping it unchanged at 2.75% for three straight meetings.
During their rate deliberations last month, they debated rate cuts. Some members held the view that the bank may have already provided sufficient support through its aggressive easing cycle. Others said further support would likely be needed given the softness in the economy, particularly if the labour market weakened further.
Andrew Grantham, economist at Canadian Imperial Bank of Commerce, said the easing in inflationary pressures during July means one obstacle on the path toward a potential September rate cut has been cleared.
“While there is still a lot more data to be released between now and the mid-September BoC meeting (including another CPI release), today’s release is supportive of our current call for a 25 basis-point reduction at that time,” he said in a report to investors.
The inflation report is positive on many fronts as price pressures ease for goods and services, Andrew DiCapua, principal economist at the Canadian Chamber of Commerce, said in an email.
“We’re still seeing sticky core measures in July as risks to progress, but if this momentum continues, we could see the Bank of Canada move rates lower in September. Time will tell if tariffs are feeding through consumer prices, but there are some upward trends on food and durable goods products that could tilt the scales as the effects of tariffs are realized,” he said.
In July, Canadians paid more for food and shelter. Prices for food purchased from stores grew faster, jumping 3.4% from a year ago. Unfavourable weather in growing cocoa and coffee-growing regions led to higher prices for products using those ingredients. Consumers paid 27.1% more at grocery stores than they did in July 2020.
Shelter prices rose 3% from a year ago, up from June’s 2.9% increase, with upward pressure primarily stemming from the natural gas and rent. This was the first acceleration in shelter prices in February 2024. Rent prices grew 5.1% and accelerated most in Prince Edward Island, Newfoundland and Labrador and British Columbia.
Out of 10 Canadian provinces, six saw prices rising at a slower year-over-year pace in July compared with June. Nova Scotia’s inflation held steady. Quebec, Prince Edward Island and Newfoundland and Labrador saw higher inflation in July, with the latter experiencing the most acceleration, mainly due to higher electricity prices.
–With assistance from Mario Baker Ramirez and Carter Johnson.
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Last modified: August 19, 2025