Canada's inflation rate has risen again
Economists predict the Bank of Canada may raise its key rate again because of this
On Tuesday, it was reported that Canada's inflation rate climbed to 3.3% in July. This is more than expected. At the same time, the main indicators, to which the Bank of Canada pays attention, remain at the same level. This data increases the likelihood of another interest rate hike, as many economists believe.
Analysts contacted by Reuters news agency had forecast inflation to rise to 3% after a fall to 2.8% recorded in June. Statistics Canada (StatCan) revealed that the consumer price index (CPI) rose 0.6%, double the 0.3% rise that had been forecast.
The Bank of Canada's 2 main measures of core inflation, the Consumer Price Index and the trimmed Consumer Price Index, averaged 3.65%, down slightly from 3.70% in June.
StatCan believes that last month's rise in core inflation was driven mainly by the base-year effect in gasoline prices, as the July 2022 decline in fuel prices was no longer affecting the 12-month movement.
"I think we're getting another round of spiraling upside risks to inflation in Canada. Hikes aren't done in my opinion," Derek Holt, vice president of capital markets economics at Scotiabank, shared with Reuters.
Money markets raised bets that the Bank of Canada will raise its key rate by 25 points in September. Immediately following the news of rising inflation, the probability of a key rate hike rose to 35% — a 13% increase from the previous reading. The probability of the Central Bank of Canada raising the interest rate then declined slightly, and is now holding at 31%.
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