By Ketki Saxena
Investing.com -- Canada's inflation rate fell to 7.6 percent in July, according to a report from Statistics Canada, easing down from June’s 39-year high of 8.1 percent, and marking the first monthly decrease for the first time in 12 months.
The decrease was largely driven by a moderation in gasoline prices.
Gasoline prices declined on a monthly basis in July, according to the agency's Consumer Price Index. Consumers paid 9.2 percent less for gasoline in July than they did in June, the first monthly decline in gas prices since April 2020. Ontario saw a 12.2 percent monthly decline in gas prices — the largest of any province after the provincial government implemented a gas and fuel tax cut on July 1.
On an annual basis, gasoline prices were still 35.6 percent in July but slowed from a 54.6 percent yearly increase in June.
Natural gas prices, however, continued to soar, up 12.4 percent month-to-month and 42.6 percent year-over-year.
The prices of other necessities continued to soar, with grocery prices up 9.9 percent in July, compared to 9.4 percent in June. Bakery products, eggs and fresh fruit are among the items seeing faster price growth. Baked goods in particular are up 13.6 percent as the Russian invasion of Ukraine has contributed to surging wheat prices.
Shelter costs moderated, including owned accommodation expenses and homeowners' replacement cost, while rents increased (4.7%) as did the mortgage interest cost index (1.7%), which rose for the first time since September 2020 amid a higher interest rate environment.
The downtrend in inflation, which was largely expected by economists, indicates that the Bank of Canada’s recent rate hike spree is starting to show signs of working.
But inflation remains well away from the Bank of Canada’s target at or around 2 percent, and appears unlikely to deter a hawkish central bank that now determines entrenched inflation is a greater risk than an economic slowdown. Another outsize rate hike is expected from the Canadian central bank in September.