Higher gas prices expected to nudge Canada’s inflation rate back near 3% in July, economists say

Higher gas prices are expected to push Canada’s inflation rate back up near three per cent for July, but economists believe the spike will only be temporary.

Statistics Canada is scheduled to publish its latest Consumer Price Index report on Monday morning, which will give an overview on inflation in July.

Forecasts from CIBC Capital Markets suggest inflation reached three per cent in July after lower gas prices in June cooled it down to 2.8 per cent. A reading above three would be the highest since May, when inflation rose to 3.2 per cent due to the global oil price spike caused by Iran war .

Andrew Grantham, executive director and senior economist at CIBC Capital Markets, said gasoline prices experienced a “partial rebound” after the United States and Iran renewed strikes in early July, but didn’t reach the peaks hit when the conflict first started earlier this year.

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He also expects the recent gas price spike to be temporary, but noted that some prices are still under pressure.

“We’re still seeing that initial pass through from the first spike in global oil prices that we had over the spring,” Grantham said in an interview, singling out higher airfares . “They’re not as high as what we saw earlier this year, but these are year-over-year inflation rates, so they’re still a lot higher than they were a year ago.”

Nathan Janzen, assistant chief economist at RBC Economics, expects inflation edged up slightly to 2.9 per cent in July.

Janzen added that, despite higher gas prices, there is little evidence of broader inflationary pressures on Canadian consumer prices.

Core inflation — which excludes volatile components such as food and gasoline prices — have remained relatively stable for most of the year, with measures like CPI-trim and CPI-median hovering at under two per cent year-over-year in June.

“That will generally continue in the July data. Oil prices have moved higher again, but they are still below the peak levels seen in April and May, so not at the levels we would expect to see a pass-through to broader consumer prices beyond the immediate impacts on the price of gasoline and airfares,” he said in an interview.