Canada's July inflation hits 3% as gasoline costs surge

Canada's annual inflation rate accelerated to 3% in July, reaching the upper limit of the Bank of Canada's 1%-3% control range, according to data released Monday by Statistics Canada. The reading came in slightly above analyst expectations of 2.9%.

On a monthly basis, the consumer price index rose 0.5%, with higher gasoline costs again providing the main upward push. Gasoline prices were up 25.7% year-on-year in July, accelerating from a 20.5% increase in June, as renewed tensions between the United States and Iran lifted energy prices.

Travel tour prices also contributed to the annual rise, as consumers paid more for hotels and flights to the United States, particularly to cities hosting the football World Cup. However, a slowdown in grocery price increases provided some relief, with food purchased from stores rising 3.1% in July, down from 3.9% in June. Despite this moderation, grocery inflation has now outpaced the overall CPI for 18 consecutive months.

Shelter costs, including rents and mortgage interest, remained subdued, rising just 1.3% in July.

Core inflation measures, which strip out volatile items, were largely stable. The CPI-trim and CPI-median came in at 1.9% and 2.0% respectively, with both hovering near the midpoint of the central bank's target range. Economists suggest that with underlying price pressures contained around 2%, the Bank of Canada is likely to keep its key policy rate unchanged for the remainder of the year.