Inflation Pressures Ease in Canada in July, Notes RBC

11:01 AM EDT, 08/19/2025 (MT Newswires) -- Canadian inflation pressures showed welcome signs of easing in July, said RBC after Tuesday's consumer price index.

Headline CPI was still biased lower by the removal of consumer carbon surcharges back in April but the slowing to 1.7% year over year from 1.9% in June was mostly reflecting easing in underlying inflation pressures -- the Bank of Canada's preferred median and trim core CPI measures again grew at a slower sub-0.2% rate in July seasonally adjusted from June.

Those rates of price increases are smaller than what the bank expected -- RBC had looked for persistent strength in services components to again show up, echoing resilience seen in consumer spending broadly to date.

Still, one reading doesn't make a trend and the diffusion index RBC calculates is still pointing to relatively broad-based inflation pressures across the consumer spending basket in July.

From the BoC's perspective, the easing this month is welcome. However, the central bank has also already cut interest rates significantly over the last year and will need to consider the potential impact of expected government spending increases as a more effective policy response to United States tariffs than further changes in interest rates, pointed out RBC.

Labor markets in Canada have softened but as the bank looks, not much further for a bottom of conditions, RBC doesn't expect the BoC will cut again in this cycle.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.