Nathan Janzen, the senior economist at Royal Bank of Canada (RBC), notes that Canada’s headline inflation increased 0.5% m/m in July and 2.0% y/y.

• “A surge in July airfares (a 14% increase from June) was to blame for a big chunk of what was a stronger-than-expected month-over-month headline price increase.  But airfares jumped a similar amount last year in July as well.  The gains have more to do with a new methodology for the component implemented more than a year ago than an underlying change in price growth.
• Looking through monthly wiggles, underlying inflation trends still look pretty solidly anchored around the Bank of Canada’s 2% target rate. The headline index was up 2.0% year-over-year. Excluding food & energy products, prices were up 2.2% from a year ago.  Probably most importantly for future Bank of Canada policy decisions, the central bank’s preferred ‘core’ measures averaged 2.0% once again – extending the tight 1.9%-2.1% range since February 2018 for another month.”