Inflation reaches 8.1% in Canada, raising odds of further interest rate hikes

The recent report by Statistics Canada shows that consumer price inflation reached a record high level in June since January 1983. Such results will keep pressuring the central bank to follow its aggressive rate-increases path.

Last month, the consumer price index was up by 8.1% annually and by 0.7% monthly.

However, the results are still below expectations, as economists predicted an 8.4% annual increase and a 0.9% gain compared to May, a Bloomberg survey says.

The hike in the annual pace of inflation exceeding 8% will force the Bank of Canada to continue its rate hikes cycle, although the numbers are starting to soften. It may intensify expectations that price pressures may be reaching their peak.

The main driver of inflation in June was a hike in gasoline prices: the annual gain reached 55%, while a month-over-month comparison reported an increase by 6.2%. Meanwhile, food and shelter costs are showing certain signs of slowing, with food prices rising by 0.1% from May and marking the smallest gain in a year.

In addition to it, shelter costs rose by 0.4%, which is the smallest hike since November. Such numbers partially reflect lower real estate commissions as the real estate market slowed, Statistics Canada noted.

This month, the BoC said it expected an average inflation of about 8% in the third quarter of 2022, followed by certain slowing. Investors believe the Bank will raise its key lending rate by 0.75% in September after a 1% increase seen in July.