Economists expect tariffs lifted food prices, core inflation in July

Statistics Canada is set to release inflation figures for July on Tuesday. A shopper pushes a shopping carts as they leave a Real Canadian Superstore in Ottawa on Tuesday, June 25, 2024. THE CANADIAN PRESS/Sean Kilpatrick

OTTAWA — Tariff impacts are expected to keep underlying inflation elevated in July, a Desjardins economist says, even if the headline figure retreats.

Statistics Canada is set to report inflation figures for July on Tuesday. A poll of economists expects annual inflation cooled last month to 1.7 per cent, according to LSEG Data & Analytics.

June’s consumer price index showed the annual rate of inflation ticked up to 1.9 per cent.

Randall Bartlett, deputy chief economist at Desjardins, said he expects the headline inflation figure slowed beyond expectations to 1.6 per cent in July as lower energy costs continue to take steam out of price pressures.

“We’re kind of expecting it to be a bit softer than what we saw back in June. So, from a headline perspective anyway, that’s overall pretty positive news for Canadians,” he said in an interview.

RBC is above the economists’ consensus, expecting July’s annual inflation reading will match the 1.9 per cent seen in June.

Economists Nathan Janzen and Claire Fan wrote in a note to clients Friday that the removal of the consumer carbon price at the start of April “continues to artificially lower headline inflation.”

But they warned that price pressures below the surface should remain stubborn in July.

“Underlying trends have surprised upward this year, partly due to tariff impacts on products like food and vehicles, but also from higher prices for domestic services,” Janzen and Fan wrote.

The Bank of Canada’s preferred metrics of core inflation floated a bit above three per cent in June, according to Statistics Canada.

Bartlett said Desjardins foresees these metrics holding between 2.5 per cent and three per cent for the rest of the year as Canada’s tariff dispute with the United States drives up prices.

He said he’ll be looking to see whether more businesses were passing costs from tariffs onto consumers in July.

Consumer price index data from the United States this past week appeared to show a tariff impact in the form of higher prices for shoes and furniture.

While he believes the bulk of tariff price impacts were passed through in April and May, Bartlett said Canada will continue to feel the pinch from border levies on food and durable goods.

“That’s going to put persistent upward pressure on price growth in Canada,” he said.

The Bank of Canada held its benchmark interest rate steady at 2.75 per cent on July 30 as it waits for more information on how the Canada-U.S. trade dispute is affecting the economy.

The summary of deliberations from that decision released this past week show the central bank’s governing council remains wary of the effect of tariffs on inflation.

Members indicated in those minutes that the impact on consumer prices “appeared to be modest so far,” but the tariff influence is only just starting to show up in the data.

While businesses’ inflation expectations remain well-anchored according to recent surveys, the governing council said the costs of finding new suppliers amid shifting global trade could still push prices higher.

“Overall, members agreed that it was still too early to assess how tariffs and the rewiring of trade would affect economic activity and inflation in Canada,” the summary read.

Bartlett said he expects economic data will open the door to a quarter-point interest rate cut at the Bank of Canada’s next decision on Sept. 17.

But that’s contingent on core inflation readings getting back under control in the upcoming CPI releases for July and August.

“If we see that there’s less passthrough from tariffs into inflation than we’re expecting … we think there there’s an opportunity for the Bank of Canada to cut further,” he said.

This report by The Canadian Press was first published Aug. 17, 2025.

Craig Lord, The Canadian Press