OTTAWA — Economists expect inflation edged higher in July as consumers were getting whiplash at the gasoline pumps. Statistics Canada is set to provide a look at the consumer price index for July on Monday. A Reuters poll of economists expects annual inflation rose a tenth of a point to 2.9 per cent last month. June’s progress toward peace between the United States and Iran led to a pullback in global oil prices and inflation cooled accordingly. But the tentative ceasefire buckled in July and renewed hostilities in the oil-producing region sent gas prices higher again. Economists at Royal Bank of Canada calculate that, while gas prices remain below their peaks in April and May, prices at the pump were 25 per cent higher in July than a year ago, compared with a 20 per cent annual hike in June. RBC economists Nathan Janzen and Claire Fan said in a note Friday that they are with the consensus and see inflation rising a tick to 2.9 per cent in July. TD Bank senior economist Andrew Hencic said he also expects the headline inflation rate reversed course and ended up around 2.9 or three per cent last month. “Things have been quite volatile,” he said in an interview. “June, we had a steep decline in the energy prices, and July, it’s just almost as steep a reversal. So you would expect to see a meaningful contribution from gasoline and energy prices in this report.” In addition to relief at the gas pumps, June’s inflation figures showed an easing at grocery stores. Food inflation slowed to 3.5 per cent that month, down from 3.8 per cent in May. RBC’s Janzen and Fan said they expect food inflation eased again in July but remained above three per cent. Hencic said food prices are “notoriously difficult” to predict on a monthly basis as weather-related disruptions have outsized impacts on inflation at the grocery store. The closure of the Strait of Hormuz as part of war in the Middle East didn’t just lead to a bottleneck of fuel shipments from the Gulf region, it also stymied supplies of key agricultural inputs like fertilizer. That could lead to sustained pressure on food inflation in the months ahead, Hencic warned, even as gas prices recede again. The July inflation data will be the Bank of Canada’s final look at price pressures ahead of its next interest rate decision on Sept. 2. The central bank has held its benchmark interest rate steady at 2.25 per cent in six consecutive decisions. Officials see their policy rate at about the right level to guard against inflation while supporting modest economic growth. Even if the headline inflation rate ticks higher in July, Hencic said he doesn’t expect the upcoming price data to knock the Bank of Canada off its stand-pat stance. As of Friday morning, financial market odds for another rate hold from the Bank of Canada next month stood at nearly 97 per cent, according to LSEG Data & Analytics. Monetary policymakers will be looking for any signs that the energy price shock is filtering into underlying inflation pressures. Janzen and Fan said they expect to see limited pass-through from higher energy prices, though costly airfares are expected to be a pain point in the July report. The central bank will also be paying attention to whether other areas of the economy are stimulating demand and threatening to drive up prices. Hencic said that while the latest jobs and gross domestic product figures have shown solid growth in recent months, the unemployment rate is still elevated. That means the labour market is unlikely to be fuelling any acceleration in core inflation right now. “From our lens, that should keep the Bank of Canada on the sidelines for now, monitoring incoming data, and then looking whether a trend is emerging of sustained upward pressure on underlying measures of inflation,” Hencic said. “We’re not there yet. We don’t think that this month will tip the scale in any one direction either.” --- Craig Lord, The Canadian Press This report by The Canadian Press was first published Aug. 14, 2026.
