Gas price rebound drove inflation up to 3% in July: StatCan

Excluding gas, the consumer price index rose 2.2 per cent in July for a third consecutive month, StatCan said.

Higher jet fuel prices contributed to a 12 per cent hike in the cost of airfares last month, up from 9.6 per cent in June, the agency said.

Travel tour costs also accelerated sharply in July, which StatCan attributed to more expensive hotels and flights to U.S. destination cities that were hosting FIFA World Cup games.

BMO senior economist Robert Kavcic said in a note to clients Monday that with the World Cup now over and gas prices receding over the first half of August, this month’s price data should show some reversals on those pain points.

Helping to offset those cost pressures in July was some relief at the grocery store. StatCan said inflation for food bought from the store cooled to 3.1 per cent in July, down from 3.9 per cent in the previous month.

Slowing price hikes for fresh vegetables and chicken products, as well as lower prices for cereal products, drove the decline. Inflation for fresh fruit meanwhile accelerated to 6.1 per cent from 1.7 per cent previously as prices rose for berries and melons.

Despite the slowdown, grocery store inflation has now outpaced the all-items consumer price index for 18 consecutive months.

The July inflation figures mark the Bank of Canada’s last look at price data before 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 straight decisions.

Kavcic pointed out that there was some firmness in the central bank’s preferred measures of core inflation last month. But even with some of the shorter-term measures of underlying inflation heating up, the long-run annual rates remain near the Bank of Canada’s two per cent target.

Between a couple of strong gross domestic product and jobs reports in recent weeks, and the Aug. 19 deadline for new U.S. tariffs just days away, Kavcic said BMO is comfortable with its call for the central bank to remain on hold next month and for the remainder of 2026.

“There’s a lot of push and pull on the growth side of the Canadian economy — for example, a powerful Q2 rebound still to be tested by ongoing trade uncertainty,” Kavcic said. “But the inflation side is looking stable and well-behaved despite a bit of heat in July.”

CIBC senior economist Andrew Grantham agreed with Kavcic that July’s core inflation measures were tame enough that the Bank of Canada should be in no rush to raise its benchmark interest rate in response to price pressures.

He said in a note that monetary policymakers have plenty of time to gauge how oil price fluctuations and the tariff situation will resolve, and determine whether signs of an economic rebound will be sustained in the months to come.

CIBC forecasts no change in the benchmark interest rate until mid-2027.

This report by The Canadian Press was first published Aug. 17, 2026.

Craig Lord, The Canadian Press

by The Canadian Press

Gas price rebound drove inflation up to 3% in July: StatCan

Our Community