Canada’s

inflation rate

slowed to 1.7 per cent in July, but economists remain in a “wait and see” mode when it comes to the future of

interest rates.

Statistics Canada on Tuesday said Canada’s consumer price index (CPI) fell 0.2 percentage points from June, largely on the back of a drop in gasoline prices, which declined 0.7 per cent on a monthly basis.

Here’s what economists had to say about the latest inflation numbers.

‘Cleared one obstacle’ toward rate cut: CIBC

Andrew Grantham, a senior economist at CIBC Capital Markets, said July’s inflation numbers show that the Canadian economy is one step closer to another interest cut.

“We have successfully cleared one obstacle on the path towards a potential September interest rate cut,” he said in a note.

“While there is still a lot more data to be released between now and the mid-September (

Bank of Canada

) meeting (including another CPI release), today’s release is supportive of our current call for a 25-(basis-point) reduction at that time.”

Easing inflation ‘welcome’ for BoC: RBC

Royal Bank of Canada

senior economist Claire Fan said the latest inflation reading will be “welcome” news for the Bank of Canada, but an interest rate cut is unlikely at its next meeting in September because the underlying numbers are still relatively high and there is other economic data still to come.

“One reading doesn’t make a trend and the diffusion index we calculate is still pointing to relatively broad-based inflation pressures across the consumer spending basket in July,” she said in a note.

“As we look not much further for a bottom of conditions, we don’t expect the (Bank of Canada) will cut again in this cycle.”

Inflation still ‘too firm’ for cuts: Oxford Economics

Michael Davenport, senior Canada economist at Oxford Economics Ltd., said the inflation numbers, while lower than in June, don’t move the needle when it comes to an interest rate cut in the near future.

“Most measures of core inflation also edged down last month, but underlying inflation likely remains too firm for the Bank of Canada to be comfortable cutting rates in September,” he said in a note.

“With trade policy uncertainty still elevated and underlying inflation running too hot for the (Bank of Canada)’s liking, we expect it will continue to hold the policy rate steady at 2.75 per cent on Sept. 17.”

Davenport also predicts that Canada’s relief from inflation will be short-lived as the effect of United States tariffs begins to take hold.

“We expect both headline and core CPI inflation will continue to creep up in the near term as costs from the

trade war and Canadian counter tariffs

gradually pass through to retail prices, particularly once most temporary counter tariff relief ends in mid-October,” he said.

Rate cut ‘back into the fold’: Capital Economics

Bradley Saunders, North America economist at Capital Economics Ltd., said the soft inflation data brings back the possibility of an interest rate cut in September, provided the remaining economic data points favourably toward a cut.

“A September rate cut is certainly on the cards, though policymakers will probably want to see further signs of a sustained economic slowdown in forthcoming GDP and labour market data before they commit,” he said in a note.

  • Canada’s inflation cools to 1.7% as gasoline prices drop
  • Bank of Canada still unsure where interest rates should land

“We are wary of the hawkish comments published in the Summary of Deliberations from July’s (Bank of Canada) meeting last week and will need to see greater evidence of a sustained economic slowdown in the forthcoming (gross domestic product) and labour market data, due before the (central bank) next meets, before we can be sure.”

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