Decelerating Inflation in July Clears An Obstacle to Potential September Bank of Canada Rate Cut, Says CIBC

08:56 AM EDT, 08/19/2025 (MT Newswires) -- An easing in inflationary pressures during July means that one obstacle on the path towards a potential September Bank of Canada interest rate cut has been "successfully cleared," said CIBC after Tuesday's release of consumer price index data.

Headline inflation eased a touch more than expected to 1.7% year over year, from 1.9% while consensus was 1.8% year over year, on the back of a 0.3% monthly increase in unadjusted prices, or 0.1% seasonally adjusted (SA), noted the bank.

The easing in the headline rate largely reflected a sharper year-over-year decline in gasoline prices this month, pointed out CIBC.

However, price pressures excluding food and energy were also tamer in July, posting a 0.1% SA monthly advance.

Core measures of inflation (CPI-X, CPI-Trim and CPI median) also increased only modestly on the month. While the year-over-year rates for CPI-Trim and Median failed to decelerate and remained at or slightly above 3%, that was largely due to base effects from a year ago.

Following the surprise acceleration earlier in the year, the recent trend in both has been softer and the three-month annualized rates have fallen back below 3%, to 2.4% in July.

While there is still a lot more data to be released between now and the mid-September BoC meeting -- including another CPI release -- Tuesday's release is supportive of CIBC's current call for a 25bps reduction at that time.

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