Canadian Inflation (July 2026)

Canadian prices, as measured by the Consumer Price Index (CPI), rose 3.0 per cent on a year-over-year basis in July, following a 2.8 per cent increase in June. On a seasonally adjusted monthly basis, the CPI was up 0.3 per cent in July, equivalent to a 3.6 per cent increase on an annualized basis. The CPI ex-gasoline increased by 2.2 per cent in July for a third straight month. Additionally, food purchased from stores increased by 3.1 per cent, down from 3.9 per cent in June. In BC, consumer prices rose 2.9 per cent year-over-year in July, up from 2.8 per cent the month prior. The Bank of Canada's preferred measures of median and trimmed inflation, which strip out volatile components, rose by 2.0 per cent and 1.9 per cent year-over-year, marginally higher than the previous month’s increase.
 
As expected, the reignition of the Iran conflict and its resulting stress on the Strait of Hormuz translated into higher gasoline prices in late July, placing upward pressure on headline inflation. Looking at major components, grocery price growth outpaced the overall CPI for an 18th consecutive month, while shelter prices decelerated to their lowest year-over-year increase in over 5 years at 1.3 per cent. Moreover, 3-month annualized core inflation increased from the previous month to about 2 per cent, essentially on-par with the Bank of Canada’s desired target level. While we expect the Bank to hold its policy rate through 2026, markets remain expectant of eventual rate hikes in 2027 as the Bank looks to reach the midpoint of its balanced range at 2.75 per cent. However, the Bank’s trajectory will remain somewhat uncertain while volatility in both global oil markets and trade persist.