Business

Canada's inflation rate held steady at 2% in July, higher than expected

Canada's inflation rate held steady at two per cent in July as the price of gasoline got cheaper but the price of airline tickets soared.

Loonie inches higher on strong number, and odds of a rate cut next month get lower

Plane tickets have gotten almost five per cent more expensive in the past year, Statistics Canada says. (J.P. Moczulski/Canadian Press)

Canada's inflation rate held steady at two per cent in July as the price of gasoline got cheaper but the price of airline tickets soared.

Statistics Canada's Consumer Price Index stayed at the same annual rate in July that it was in June, even though economists polled by Bloomberg were expecting the rate to go down a little.

Prices for air transportation have risen by 4.6 per cent in the past year, one of the biggest factors keeping inflation high. On the flip side, gasoline prices have fallen by 6.9 per cent in the past 12 months, which is helping to keep a lid on it.

The strong inflation number caused the Canadian dollar to jump about a quarter of a cent to 75.40 US cents.

The strong number also lowered the odds of a rate cut by the Bank of Canada next month. 

Prior to the numbers coming out, traders thought there was about a one in five chance the central bank will cut its benchmark rate next month, to stimulate the economy in the face of fears of global recession. But a strong inflation number implies the economy is doing just fine as it is, which is why traders lowered the odds of a rate cut to less than one in six, after the inflation number came out.