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Special Report

Canada Inflation Research Brief

August 2023

Mixed Signals for Bank of Canada to 
Consider as Inflation Trends up Once Again

Inflation ticks up amid base-year effect. In July, annual inflation increased to 3.3 per cent. This was above the Bank of Canada’s target range, as well as the consensus estimate of 3.0 per cent. July’s CPI acceleration was mainly attributed to a base-year effect in gasoline prices as the impact of the Russian-Ukraine war is no longer impacting the 12-month movement in energy inflation. Nonetheless, the BoC’s preferred measure, the three-month annualized average of CPI-trim and CPI-median, fell to 3.5 per cent, down from 3.9 per cent in June. Also, the BoC’s “supercore” inflation, which measures price pressures stemming from services — excluding shelter and energy — eased to 4.2 per cent from 4.8 per cent on a three-month annualized basis. While declining core inflation provides some evidence of  broader price easing, the larger-than-expected increase in headline inflation raises the risk of a further rate hike.

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