Canada's July inflation report on Monday is expected to show headline CPI accelerating, two days before new U.S. Section 338 tariffs take effect. The pickup is driven by a reacceleration in energy prices, while core inflation measures stay close to target.
Headline CPI seen ticking higher
Canada's Consumer Price Index for July, due Monday, is expected to show year-over-year price growth rising to 2.9% from 2.8% in June. The report lands just before the latest round of U.S. Section 338 tariffs is set to take effect on Wednesday, adding a trade-policy backdrop to the inflation release.
Energy costs are behind the expected pickup. Oil prices remain below their April and May peaks, but bounced higher in July as conflict in the Middle East continued to disrupt transportation through the Strait of Hormuz. As a result, gasoline prices were on average 25% above a year ago in July, up from a 20% rise in June.
Core measures hold near target
Pass-through from higher energy prices to broader consumer prices has reportedly remained limited. Growth in airfares stays high, but core measures' prices have remained near the 2% target. Prices excluding food and energy are expected to tick up to 1.9% from 1.8% in June, with the Bank of Canada's preferred median and trim measures likely holding around similar rates.
Food price growth likely edged lower, but probably remained above 3%.
Source: ActionForex
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