Canada’s headline inflation rate slowed to a pace of 2.5% in July, Statistics Canada reported.

The reading was in line with expectations and was down from June’s headline figure of 2.7%.  

The Bank of Canada’s preferred measures of core inflation were also down, with annualized rates of 2.4% for CPI-median and 2.7% for CPI-Trim.

The deceleration was largely due to base-year effects, meaning lower growth relative to 12 months ago. Prices for travel tours were down 2.8% year-over-year and passenger vehicle prices were 1.4% lower.

Shelter costs saw their slowest increase in 17 months at +5.7%, down from +6.2% in June. Rent inflation continued to ease to +8.5% year-over-year (down from +8.8%) and mortgage interest costs are up 21% year-over-year, down from a rate of +22.3% in June. 

With inflation continuing its downward trend, the Bank of Canada is still expected to move forward with its third consecutive rate cut at its next meeting on September 4.

“The July CPI report should further cement a 25 bp rate cut from the Bank of Canada in September,” wrote BMO’s Benjamin Reitzes. “There's no urgency for policymakers to act more aggressively at this point, but rate cuts will keep coming as inflation continues to move toward 2% and the economy sports a sizeable output gap.”

August inflation data will be released on September 17, 2024.