Cooler inflation won't sway Bank of Canada from another jumbo hike in September, economists say

Bay Street economists are reacting to the July inflation readings, which came in at a relatively cooler rate of 7.6 per cent compared to 8.1 per cent in June. The gasoline story has dominated the cool-off, with the pace of prices increasing in July compared to June.

Economists and business leaders say that the Bank of Canada's mission to bring inflation back down to a two-per-cent reading is far from over despite the fact that core measures reached a record 5.3 per cent in July. The street had a message.

An economist at a bank.

The dip in the headline rate was accounted for by lower gasoline prices, which dropped to around $18 a gallon by the end of July. Just over the first two weeks of August, pump prices fell by another 6 percent. More cooling in the housing market, easing global supply chain constraints and lower commodity prices will all help to ease price pressure for a wider range of products.

It is not unreasonable to think that the headlineCPI rate and the breadth of inflation pressure will turn a corner. The Bank of Canada has a comfort zone of one per cent to three per cent, but the pace of inflation is far above that.

The policy rate will be 3.5 percent by the end of the year.

The chief economist at Bank of Montreal isDouglas Porter.

There is a rotation of where the most intense price pressures are coming from. Pulling these two conflicting trends together leaves us with still-high underlying inflation pressures of just Underlying inflation is at least 2 percentage points above the top end of the BoC's 1 per cent to 3 per cent target zone, and they all send the same message.

The report is a step in the right direction, but the journey is a long one and it is likely to remain so through the second half.

The prediction is for a minimum of 50 basis points.

There is a head of macro strategy at Desjardins.

Canadians looking at consumer price data will be reassured. For the first time in over a year, the annual rate of inflation is lower than it was in the previous month.

This is not the time to relax. The 9.2 per cent decline in gasoline prices did a lot to blunt price growth in other areas... The average of the Bank of Canada's three core measures went up to a record high.

The central bankers will probably hike by 50 basis points in September.

Karl is the chief market strategist at Cambridge.

Canadian headline inflation rates fell again last month, but price pressures expanded across many services sectors, keeping the Bank of Canada on a tightening trajectory.

The swaps market expects a coin flip between 50 and 75 basis point hike in September, given the slight increase in the Canadian dollar.

Veronica Clark is an economist.

Shelter price contribution to headlineCPI could be stabilizing as falling home prices start to feed through to key components. The more important details in our view were a continued climb higher in average core inflation measures. The Bank of Canada should be paying attention to this.

In September, the rate will be 75 basis points.

The email address is shughes@postmedia.

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