Canada's inflation climbs to 3% in July as gasoline prices spike 25.7%

What changed in the July print

Canada's headline Consumer Price Index climbed to 3% year-over-year in July, up from 2.8% in June, according to monthly data from Statistics Canada released on Monday. Gasoline prices rose 25.7% year-over-year for the month, accelerating from a 20.5% gain in June. Statistics Canada attributed the gas price spike to the ongoing conflict in the Middle East, the blockade of the Strait of Hormuz, and the partial closure of Red Sea shipping routes in late July. Both lead sources reporting on the release framed the move as a gas-driven lift to the top-line number rather than a broad-based acceleration in consumer prices.

Food inflation cools but stays elevated

Food inflation slowed to 3.1% in July from 3.9% in June, the slowest pace since June 2025. Slower price growth for fresh vegetables and chicken, together with lower prices for cereal products, drove the slowdown, while higher prices for fresh fruit partially offset the easing. The largest yearly increases among tracked food items were bananas at 13%, lettuce at 18.8%, carrots at 15.6%, and beef at 12.4%. July nevertheless marked the 18th consecutive month in which grocery price inflation outpaced overall inflation. Randall Bartlett, deputy chief economist at Desjardins Group, said food inflation is "moving in the right direction" but warned a return to the 2% pace may not come "until well into 2027," citing summer food imports, higher transportation costs, and elevated fertilizer and production costs tied to the Iran war.

Knock-on effects across travel and air fares

Higher energy costs fed through to travel prices in July. Air fares rose 12% year-over-year, the third consecutive monthly increase, as airlines passed on higher jet fuel costs. Travel tour prices climbed 15.2% year-over-year, reflecting more expensive hotels and flights to the U.S. during the FIFA World Cup. Bartlett described the World Cup effect as a "one-off factor" likely to reverse in August, and projected a three-month average through August "just below three per cent," still within the Bank of Canada's 1–3% operating band.

Core measures and what economists are watching

Core inflation measures rose slightly but remained relatively stable, with CPI-median at 2% and CPI-trim at 1.9%. Robert Kavcic, senior economist at BMO Economics, called the core reading "warmer than expected," noting that the trim and median each ticked up by a tenth and that the breadth of core components shifted more toward the high side in July. He added that the six- and 12-month picture still shows inflation "bouncing around two per cent." Economists cited in the coverage said the next directional move will hinge on whether new 50% U.S. tariffs take effect this week, a factor that could pull the CPI in either direction depending on the policy outcome.

Near-term outlook

With energy-led lift to the July headline and one-off World Cup-related travel costs, economists are watching the August CPI release and any U.S. tariff decisions for confirmation of the trend. Bartlett's projected three-month average through August of "just below three per cent" would keep the gauge inside the Bank of Canada's 1–3% operating band, while Kavcic's core-momentum caution leaves open the question of whether underlying inflation pressures are firming.