Rising Canadian Inflation Sparks Rate Hike Speculation

Canada's annual inflation rate rose to 3.3% in July, surpassing expectations and increasing the likelihood of another interest rate hike. The consumer price index increased by 0.6% on a month-over-month basis, higher than forecasted. The rise in inflation was mainly due to a base-year effect in gasoline prices. The Bank of Canada's core measures of underlying inflation remained high. Money markets are now betting on a quarter-percentage-point rate hike in September. However, not all economists believe the stronger-than-expected price data will lead to an immediate hike. The Bank of Canada projected inflation to hover around 3% for about a year before reaching its 2% target by mid-2025.