Canada’s Inflation Rate Hits 3% in July as Gasoline Prices Surge

Statistics Canada reported Monday that Canada’s annual inflation rate reached 3.0% in July 2026, up from 2.8% in June, as gasoline costs accelerated. The Consumer Price Index climbed 0.5% from June.

Gasoline prices rose 25.7% from a year earlier, compared with 20.5% in June. They also increased 3.6% during July.

The jump was concentrated in fuel. CPI excluding energy rose 2.2% year over year, while CPI excluding gasoline also increased 2.2%.

Energy prices overall rose 16.6% annually. Transportation costs climbed 7.8%.

Statistics Canada attributed the energy pressure to disruptions affecting major shipping routes.

"The blockade in the Strait of Hormuz and partial closure of shipping routes in the Red Sea were to blame for the pressure on energy prices."

The agency released the figures Aug. 17. The data showed a sharp increase in headline inflation without a comparable acceleration across prices excluding gasoline.

Travel costs added pressure during the July World Cup surge

Fuel was not the only source of upward pressure. Travel tours cost 15.2% more than a year earlier, up from 6.8% in June.

Air transportation prices rose 12.0%. Jet fuel costs and FIFA World Cup demand pushed those prices higher, as the tournament increased demand for hotels and flights to U.S. destination cities during July.

The 2026 FIFA World Cup was hosted in North America. Its effect on travel prices coincided with the energy shock.

Robert Kavcic, director and senior economist at BMO Capital Markets, said some of the pressure could fade.

"Some of that upward pressure will be short-lived, as the World Cup is behind us and gas prices have come down slightly so far in August."

Early August data suggested gasoline costs had stabilized or dipped slightly. Shipping routes also began to see partial relief from local cease-fire talks, although geopolitical tension remained high.

Core measures stayed close to the central bank’s target

The Bank of Canada’s preferred measures, CPI-trim and CPI-median, averaged 1.95% in July. Those readings remained near the bank’s 2% target.

Pedro Antunes, chief economist at Signal49 Research, said the central bank would likely “look past” the energy-driven increase because underlying measures remained contained.

The bank held its policy rate at 2.25% on July 15, 2026. Most economists expected it to remain on hold at the next meeting on September 2, 2026, after the July data were released.

Tiff Macklem, the bank’s governor, and Carolyn Rogers, its senior deputy governor, addressed the volatility in the Monetary Policy Report issued July 31.

"Headline inflation has risen above 3%. If oil prices and gasoline refinery margins decline as assumed, inflation should ease in the coming months. Inflation excluding gasoline remains near 2%."

The report’s outlook depends partly on lower oil prices and narrower gasoline refinery margins. Those conditions would ease the contribution from fuel if they persist.

Grocery inflation cooled, but remained above target

Food price growth slowed to 3.1% in July from 3.5% in June. Groceries therefore provided a modest offset to higher energy and travel costs.

The pace still exceeded the central bank’s 2% target. Households faced that increase alongside higher transportation and fuel costs.

Seasonally adjusted monthly CPI rose 0.3%, largely because of fuel. Motorists therefore saw the quickest effect at the pumps.

Travelers faced a separate increase during the summer peak. Higher jet fuel costs combined with World Cup demand to lift international and domestic travel expenses.

Shipping disruptions and tariffs shaped the wider backdrop

Renewed hostilities involving the U.S. and Iran disrupted shipping through the Strait of Hormuz and the Red Sea. The disruptions contributed to a global increase in crude oil prices.

The economy was also adjusting to 50% U.S. tariffs introduced earlier in the year. Those measures contributed to economic uncertainty and volatile GDP growth.

The July release placed the energy increase against that broader economic backdrop. Its excluding-gasoline and excluding-energy measures remained at 2.2%, however.

The August data will show whether the early-month easing at the pumps continues. The bank’s next policy decision is scheduled for September 2, 2026.