| Consensus | Consensus Range | Actual | Previous | |
| CPI - M/M | 0.4% | 0.1% to 0.5% | 0.5% | -0.4% |
| CPI - Y/Y | 2.9% | 2.6% to 3.0% | 3.0% | 2.8% |
| Core CPI - M/M | 0.4% | 0.3% | ||
| Core CPI - Y/Y | 1.9% | 1.8% |
Highlights
Following its July policy meeting, the Bank of Canada judged its current monetary policy stance as “appropriate” to support the economic recovery and bring inflation back to its target. The July CPI report will do little to change that assessment as the gasoline prices fuel the headline increase but both core CPI and CPI excluding gasoline come in just below and close to the 2 percent objective, respectively.
The spike in the cost of travel tours is a one-off factor due to the World Cup.
Canada's Consumer Price Index rebounded significantly in July – up 0.5 percent on a monthly basis, after experiencing a 0.4 percent decline in June. This exceeded expectations for a 0.4 percent rise in the Econoday survey of forecasters.
Compared to July 2025, the CPI is up 3.0 percent, accelerating from the 2.8 percent pace set in June, and just above expectations for a 2.9 percent spike in the Econoday survey of forecasters.
Excluding food and energy prices, the CPI rose 0.4 percent on a monthly basis, following a 0.3 percent bump up in June. Compared to a year ago, the core CPI is up 1.9 percent in July vs. a 1.8 percent jump in June.
The average of the Bank of Canada's 'Alternative measures' of annual core inflation for July is 2.0 percent, compared to 1.9 percent in June.
The overall surge in headline inflation is no surprise, fueled by higher energy prices, which rose 2.5 percent from June, and soared 16.6 percent on an annual basis. Gasoline prices saw a 3.6 percent spike from the previous month and +25.7 percent on an annual basis.
However, excluding gasoline, the CPI still rose 2.2 percent year-over-year in July, the same pace as in May and June.
The underlying inflation data should give the Bank of Canada reason to remain on hold as it continues to assess the impact of energy prices on the Canadian economy.
Year over year, consumers paid more for travel tours in July (+15.2 percent) compared with June (+6.8 percent). On a year-over-year basis, jet fuel costs drove airfares up 12.0 percent in July, following a 9.6 percent jump in June.
The tariffs/supply chain impact continues to feed through to food prices, up 3.0 percent year-over-year with grocery store prices up 3.1 percent after a 3.9 percent increase in June. July was the 18th consecutive month that grocery price inflation outpaced the headline CPI.
Shelter price growth was minor – up just 0.1 percent on a monthly basis and +1.3 percent compared to July 2025.
Prices for goods are up 3.7 percent from a year ago in July, after a 3.5 percent jump in June, but the cost of durable goods up just 1.5 percent. Meanwhile, service price inflation increased 2.5 percent on an annual basis in July, following a 2.2 percent increase in June.
Market Consensus Before Announcement
CPI seen up 0.4 percent in July to reverse the 0.4 percent decline in June as energy prices rebounded. On year, CPI inflation expected at 2.9 percent, up from 2.8 percent in June.
Definition
The Consumer Price Index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI provide widely used measures of inflation. The policy target measure for the Bank of Canada (BoC), the annual CPI rate can be distorted by swings in the more volatile subsectors so the central bank also monitors an adjusted measure of the CPI that excludes a range of volatile categories in order to get a better handle on underlying trends.
Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as Canada, where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
As the most important indicator of inflation the CPI is closely followed by the Bank of Canada. The Bank of Canada has an inflation target range of 1 percent to 3 percent but focuses on the 2 percent midpoint. It uses the CPI and three measures of the underlying rate as the prime inflation indicators. Markets also look at core rate which excludes food and energy.