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TORONTO (Reuters) -Canada's annual inflation rate cooled to a 40-month low of 2.5% in July, matching forecasts, and core inflation measures eased as well, data showed on Tuesday, keeping the Bank of Canada on track to cut interest rates again in September.
Analysts polled by Reuters had forecast inflation to cool to 2.5% from 2.7% in June.
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COMMENTARY
ROBERT BOTH, CANADIAN MACRO STRATEGIST AT TD SECURITIES
"The details were maybe a little more dovish than we expected. We did see the Bank of Canada's core inflation measures come in a little bit softer, and if we look at what drove that deceleration, the details were quite positive.
All of those more discretionary components, the ones that should be coming under a little more pressure with financially stretched households, those are all showing more signs of deceleration."
JULES BOUDREAU, SENIOR ECONOMIST AT MACKENZIE INVESTMENTS
"In terms of core inflation, we had maybe a slightly larger deceleration than what was expected by markets. But I would say overall, it's in the margin of errors."
"If you look at shorter term inflation measures, we have been there at (the target of) 2% and even below some past months. It's only an artifact of using this one year window. But I don't think Bank of Canada is too wedded to that in their analysis. And I would bet that all models that are running are saying we are at target right now ... We will get a rate cut next month, and every other meeting until the foreseeable future."
ANDREW GRANTHAM, SENIOR ECONOMIST, CIBC CAPITAL MARKETS
"Canadian inflation continued to ease in July, keeping the door to further interest rate cuts wide open."
"With inflationary pressures fading away but concerns about the weakening labour market growing, we continue to forecast three further 25 bp (basis point) cuts by the Bank of Canada at the remaining meetings this year."
(Reporting by Divya Rajagopal, Nivedita Balu and Fergal SmithEditing by Nick Zieminski and Fergal Smith)
