Canadian Inflation (July 2025)

Canadian prices, as measured by the Consumer Price Index (CPI), rose 1.7 per cent on a year-over-year basis in July, down from a 1.9 per cent increase in June. Month-over-month, on a seasonally adjusted basis, the CPI was up 0.1 per cent in July. Downward pressure on headline inflation was driven by a sharper fall in gasoline prices year-over-year compared to June. The CPI ex-gasoline has held at 2.5 per cent over the past three months.  Additionally, shelter price growth rose for the first time since February 2024, with prices growing by 3.0 per cent in July, slightly up from 2.9 per cent in June. Food purchased in grocery stores rose at a faster pace of 3.4 per cent year-over-year compared to 2.8 per cent the previous month. In BC, consumer prices rose 1.7 per cent year-over-year in July, down from 2.1 per cent in June. The Bank of Canada's preferred measures of median and trimmed inflation, which strip out volatile components, are 3.1 per cent and 3.0 per cent year-over-year, respectively. 
 
July's CPI report continues to show a divergence between headline and core inflation, largely due to monthly fluctuations in energy prices. The Bank of Canada's core measures of inflation have remained at the upper end—and even outside of—their target range for the past three months as tariffs continue passing through the economy. With 3-month annualized core inflation dropping a full point to 2.4 per cent, this report slightly favours a rate cut from the Bank of Canada in September, as the downside risks to growth remain strong from ongoing trade uncertainties.