Gas price rebound expected to send inflation higher in July

OTTAWA - Economists predict July will see inflation rise as gas pump prices give consumers a headache. Statistics Canada will release the July consumer price index on Monday. A Reuters survey of economists anticipates annual inflation to have increased by 0.1 percentage point to 2.9% last month. June’s progress toward peace between the U.S. and Iran led to a drop in global oil prices and inflation cooled down.

However, hostilities resumed in the oil-producing region in July, causing gasoline prices to climb once more. Royal Bank of Canada analysts estimate that gas prices, though still below their April and May peaks, were 25% higher in July than a year ago, compared to a 20% annual increase in June. Nathan Janzen and Claire Fan from RBC, along with Andrew Hencic from TD Bank, agree with the prevailing consensus and expect inflation to rise slightly to 2.9% in July.

The BOC’s upcoming interest rate decision on September 2 will be based on the July inflation data. The central bank has kept its benchmark rate at 2.25% for six consecutive meetings. Policymakers are closely watching to see if the energy price shock is affecting underlying inflation pressures.