Economists expect July inflation data to set the stage for more rate cuts

Canada's inflation rate likely took another dip last month, according to economists who expect the Bank of Canada to continue cutting interest rates throughout the fall.

Canada's inflation rate likely took another dip last month, according to economists who expect the Bank of Canada to continue cutting interest rates throughout the fall.

Statistics Canada is set to publish its July consumer price index report on Tuesday and forecasters expect it will show inflation slowed to 2.4 per cent from 2.7 per cent in June.

James Orlando, TD director of economics, says despite upward pressure from gasoline and food prices, he still expects the annual rate to fall because of base-year effects, which refer to how price movement from a year ago affects the calculation of overall inflation.

"This is occurring on the back of really strong unwinding of base (year) effects from last July, where inflation went up quite significantly," he said.

The marked slowdown in price growth this year has boosted confidence among economists and the Bank of Canada that inflation will continue to ease in the coming months, giving the central bank the greenlight to continue cutting its benchmark interest rate.

"We'd have to see something very different from what we've been seeing in this inflation reading to take any sort of rate cut in September off the table," said Tiago Figueiredo, a macro strategist at Desjardins.

He says Desjardins expects the annual inflation rate fell to 2.5 per cent in July.