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Statistics Canada reported that July’s Consumer Price Index (CPI) held steady at 1.7% year-on-year, unchanged from June and below the forecast of 1.9%. This marked the fourth straight month of inflation running under the BoC’s 2% target midpoint, highlighting persistent disinflationary pressures. On a monthly basis, CPI rose 0.3%, slightly below the 0.4% estimate.

Core CPI — the BoC’s preferred gauge that strips out volatile components — increased just 0.1% MoM, matching June’s pace and well under expectations. Annually, Core CPI eased to 2.6% from 2.7%.

The softer data drove a dovish market response, but economists caution against over-interpreting a single report. Scotiabank’s Derek Holt noted that the BoC’s policy path will depend on a wider set of indicators, with two more inflation releases due ahead of the September 17 decision. Holt added that sticky service prices, broadening price momentum, and tariff-related effects could keep inflation pressures alive despite July’s weak reading.

The Canadian Dollar (CAD) weakened against the US Dollar (USD) on Tuesday, with USD/CAD rising above the resistance level at 1.3830 after softer-than-expected inflation data reinforced dovish expectations for the Bank of Canada (BoC). The next resistance level on a daily chart will be around 1.395.

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