Canada's annual inflation rate accelerated to 3% in July, slightly more than expected, as renewed United States-Iran tensions drove gasoline prices, while the cost of travel tours also rose, data showed on Monday.
On a monthly basis, the consumer price index rose by 0.5%, Statistics Canada said, once again driven by an increase in gasoline costs.
The inflation rate now sits at the ceiling of the Bank of Canada's 1% to 3% control range.
- Analysts polled by Reuters had projected consumer prices to rise 2.9% annually and 0.4% on a monthly basis in July.
- The increase in headline inflation rate had been widely anticipated because of higher energy prices, leaving the trend of underlying or core inflation as a more important signal for the BoC.
- Core inflation measures CPI-trim and CPI-median came at 1.9% and 2% respectively. Both the measures were at 1.9% in the prior month, StatsCan said.
- Economists have said that with core inflation largely hovering around 2%, the midpoint of the central bank's 1% to 3% control range, the BoC is likely to keep its key policy rate on hold for the rest of the year.
- Gasoline was the major driver of the annual rise in CPI, with prices accelerating 25.7% in July against an increase of 20.5% in June, the statistics agency noted.
- Prices for travel tours also contributed to the yearly rise in July as consumers paid more for hotels and flights to the United States, especially to the cities that hosted the football World Cup.
- However, a slower rise in grocery prices moderated the CPI, with food purchased from stores rising by 3.1% in July after posting a 3.9% acceleration in June.
- Despite the slowdown in grocery costs, July was the 18th consecutive month that grocery price inflation outpaced the all-items CPI.
- Shelter costs, which include rents and mortgage interest costs, continued to be subdued with the costs rising 1.3% in July.
- The Canadian dollar slightly firmed after the data with the currency trading up 0.17% to C$1.3851 against the U.S. dollar, or 72.20 U.S. cents.
