Canada experienced a rise in inflation to three percent in July, attributed to escalating tensions in the Middle East leading to an increase in gas prices. New data from Statistics Canada revealed that the price of gas surged by 25.7 percent year-over-year in July, compared to the prior month’s growth of 20.5 percent. The data agency pointed to disruptions in shipping routes, including the blockade in the Strait of Hormuz and the partial closure of the Red Sea, as factors exerting pressure on energy prices.

The inflation rate of three percent slightly exceeded economists’ predictions, as most experts anticipated a rise to 2.9 percent. Additionally, the cost of travel tours spiked in July, driven by more expensive hotels and flights to U.S. destinations during the FIFA World Cup. The surge in jet fuel costs contributed to a 12 percent year-over-year increase in air transportation prices in July, up from 9.6 percent in June.

However, some of these price pressures are expected to be short-lived. According to BMO senior economist Robert Kavcic, the conclusion of the World Cup and a slight decline in gas prices in August should alleviate some of the upward pricing trends. On the other hand, food prices helped offset inflationary pressures elsewhere, with the inflation rate for food purchased from stores easing to 3.1 percent in July, down from 3.9 percent in the previous month.

Statistics Canada highlighted that slower growth in fresh vegetables, chicken, and cereal products contributed to the deceleration in food inflation. Conversely, the inflation rate for fresh fruit accelerated to 6.1 percent, driven by soaring costs of berries and melons. Despite the positive food price trends, grocery price inflation has consistently outpaced the overall consumer price index for 18 consecutive months.

Core inflation measures, excluding volatile components like gas and food, were slightly higher than expected in July. The consumer price index, excluding gas, rose by 2.2 percent for the third consecutive month. Both CPI-trim and CPI-median, core inflation indicators monitored by the Bank of Canada, also exceeded expectations. However, these measures remained within the central bank’s target range, indicating stable inflationary conditions.

Looking ahead, the July inflation figures provide insight for the Bank of Canada’s upcoming interest rate decision on Sept. 2. Despite the recent inflation uptick, experts predict that the central bank will maintain its benchmark interest rate at 2.25 percent, continuing a streak of six consecutive unchanged decisions. The consensus among economists is that the Bank of Canada is unlikely to adjust interest rates for the remainder of the year due to the manageable core inflation levels observed in July.