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Nathan Janzen, senior economist at Royal Bank of Canada, notes that the Canada’s headline inflation rose 0.5% m/m in July and 2.0% y/y.

Key Quotes

“A surge in July airfares (a 14% increase from June) was to blame for a big chunk of what was a stronger-than-expected month-over-month headline price increase.   But airfares jumped a similar amount last year in July as well.   The gains have more to do with a new methodology for the component implemented more than a year ago than an underlying change in price growth.”

“Looking through monthly wiggles, underlying inflation trends still look pretty solidly anchored around the Bank of Canada’s 2% target rate. The headline index was up 2.0% year-over-year. Excluding food & energy products, prices were up 2.2% from a year ago.   Probably most importantly for future Bank of Canada policy decisions, the central bank’s preferred ‘core’ measures averaged 2.0% once again – extending the tight 1.9%-2.1% range since February 2018 for another month.”