Cooling producer and consumer inflation eased expectations for further Bank of Canada rate hikes, helping the Canadian dollar hold near 1.41 per U.S. dollar after pulling back from a one-month low.
Canadian producer prices fell 1.4% in June, the first monthly decline in five months and the sharpest drop since December 2023, adding to signs of cooling inflation in Canada. The Canadian dollar traded near 1.41 per U.S. dollar, holding most of its rebound from a one-month low of 1.40 on July 17, after softer price data reduced expectations for further Bank of Canada rate hikes this year. Annual consumer inflation slowed to 2.8% in June from 3.2% in May, below forecasts of 2.9%, while the Bank of Canada's preferred core inflation measures fell to their lowest levels in more than five years. The data reinforced the central bank's view that higher energy costs tied to the Middle East oil supply crisis are not spreading broadly through the economy. Earlier data from Statistics Canada showed the industrial product price index was still 12.4% higher than a year earlier, extending annual gains to a 21st consecutive month.