Canadian Dollar: Inflation steady near target – RBC

Royal Bank of Canada (RBC) economists Abbey Xu and Nathan Janzen note that Canadian inflation rose to 3% year-over-year in July, mainly on higher energy costs, while underlying measures like CPI-trim and CPI-median stayed near the 2% target. They see limited pass-through from energy to broader prices and expect the Bank of Canada (BoC) to hold rates unchanged through 2026.

Inflation uptick with stable core gauges

"Canadian inflation edged up to 3% year-over-year in July from 2.8% in June, driven primarily by a renewed increase in energy prices."

"Underlying inflation pressures remained comparatively contained."

"There was still limited evidence that higher energy costs had spread significantly across the broader CPI basket."

"Overall, the July report remains consistent with a relatively favourable combination of firming economic growth and underlying inflation close to target."

"Against that backdrop, we continue to expect the Bank of Canada to keep the overnight rate unchanged through the remainder of 2026."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)