MNI: Canadian Core CPI Sticks Around 3% On Food And Shelter

Canada's core inflation held around 3% in July on food and shelter, making it difficult for the central bank to justify an interest-rate cut next month.

Median CPI was 3.1% and the trim index advanced 3% from a year ago according to Statistics Canada's report Tuesday from Ottawa. Headline inflation slowed to 1.7% from 1.9% reflecting a one-time cut to a federal carbon tax that Bank officials say they can look through to focus on underlying price trends. 

Elevated core inflation predates the risk of another boost to prices from Canada's trade war with the U.S., with the biggest dispute since the 1930s also potentially slowing the economy so much BOC officials have said they may need to cut rates. Most economists say until core inflation moves back within the Bank's 1% to 3% target band for headline prices cutting borrowing costs would be risky, though a large group sees the need for a cut or two late this year. 

This is the last inflation report before BOC officials finish most of their deliberations for the Sept. 17 interest-rate decision. The next CPI report is Sept. 16.

Gasoline prices fell 16% from a year ago on the government's elimination of the household carbon tax, and excluding prices at the pump inflation advanced at a 2.5% pace for a third straight month. 

Bank officials have said their own core measures appear to be overstating trend inflation. Even CPI excluding food and energy, a more agreed-upon core measure internationally, advanced at a 2.5% pace in July. 

Shelter costs rose 3% compared with a 2.9% increase June, the first acceleration since February 2024. Rent costs climbed to 5.1% from 4.7% while mortgage interest costs slowed 4.8% from 5.6%. That continues a trend in place since September 2023. 

Inflation quickened in another category that's highly visible to consumers at a time officials are worried about price expectations. Grocery inflation accelerated to 3.4% from 2.8% in June, in part due to a global rise in cocoa and coffee beans. StatsCan noted that “As of July 2025, Canadians were paying 27.1% more for food purchased from stores than they were in July 2020.”

Canada’s central bank has held borrowing costs at the last several meetings at 2.75%. Governor Tiff Macklem had earlier cut rates at seven consecutive meetings and at the last decision said he can do so again if the economy stumbles and inflation remains stable. Macklem has also said the recent bout of elevated core inflation has his attention.