Analysts at TD Securities note that the annual Consumer Price Index (CPI) in Canada rose 3.3% in July, at a much stronger pace than the market expectation of 3%.

BoC to hold rates at 5% into 2024

"Details were slightly less hawkish, with core measures matching the market consensus for 3.6%/3.7%, and core goods were much softer with a 0.2% m/m decline."

"The headline surprise is alarming given ongoing concerns around the persistence of inflation pressures, but we do not think it's enough to tip the scales towards another hike in September. Today's report follows a 0.2pp disappointment in June, and viewing the June/July CPI reports together paints a less alarming picture for the BoC. We continue to look for the Bank to hold rates at 5.00% into 2024, but the Bank will need to see more evidence of slowing activity to stay on the sidelines through Q4."