"It was pretty much in the wheelhouse for the Bank of Canada. Broader trends still underscore a lack of price pressures."
- Mark Chandler, head of fixed-income strategy at RBC Capital Markets
Canada's annual inflation rate surged for the third consecutive month in July to 1.3% after hitting 1.2% in June, while still lagging the 1.4% expected by economists. The main contributors to growth came from gasoline prices, which soared 6.1%, while shelter costs advanced 1.3%, and clothing and footwear jumped 1.5%. However, price pressures remained muted as the Bank of Canada signalled an extended pause on interest rates. The recent figures put Canada's inflation rate back into the targeted band of between 1-3% that the BOC strives to achieve. Nevertheless, it remains still below the bank's ideal 2.0% inflation goal, the level the BOC does not expect to reach for some time.
Core CPI, which strips out volatile food and energy costs, inched higher 1.2% in the year but remained unchanged on a monthly basis. The central bank expects total CPI inflation to be 0.7% and core inflation to be 1.1% in the second quarter, according to its quarterly estimates. Both measures are seen to increase to 2% by mid-2015.
Even despite a pickup in consumer prices, other indicators are undermining worries the economy may have lived through its biggest monthly contraction since 2009 in June, as the world's 11th-largest economy struggles to build steam.
© Dukascopy Bank SA