New Inflation Data: Canada’s Inflation Rate Rose to 3% in July, Fuelled by Gas Prices

The Consumer Price Index (CPI), or inflation rate, matters for a few reasons. For most Canadians, it describes the pressures felt in purchasing goods and services, including essentials like food and shelter. As the inflation rate creeps up, pressures can increase on households around the country.

Currently, wage growth in Canada is just ahead of inflation, with a year-over-year increase of 3.6 percent, offsetting some of the financial pressures by an inflationary economy.

The Bank of Canada aims for a target inflation rate of 2 percent, with an official control range between 1 and 3 percent. If the CPI rises above 3 percent, the Bank of Canada may consider increasing interest rates to lower inflation. The next rate announcement will happen on September 2.

However, even though July saw a 3.0 increase in inflation, economists have suggested that the Bank of Canada is likely to look past this data before making a decision on rates. Most experts predict that the BoC will hold rates steady. That being said, oil price fluctuations, looming tariff deadlines, and travel returning to normal after the World Cup, could all have significant impacts on prices through the rest of the year.

“This is the last inflation report before the September 2nd BoC meeting that everyone expects to be a hold,” wrote Derek Holt, Vice-President and Head of Capital Markets Economics at Scotiabank. “There is a high bar for CPI to matter one iota in the near-term context of trade negotiations which also depends upon whether and how Canada retaliates should negotiations fail.”

The coming months will give answers to many of the questions of uncertainty surrounding the Canadian economy and could clarify the inflationary picture moving into 2027.

The Big Takeaways: What’s Increasing and What’s Decreasing?

The Consumer Price Index (CPI), commonly referred to as the inflation rate, accounts for prices across many sectors and types of spending. The July 2026 data paints a very different picture for different spending areas.

Gasoline Prices Grew More Quickly Than in June

Gasoline prices grew at a rate of 25.7 percent in July compared with 20.5 percent in June. This is driven in large part to the intensifying conflict in the Middle East, including the blockade of the Strait of Hormuz and other vital regional shipping routes.

The upward pressure on gas prices contributed to the overall increase in the inflation rate and placed upward pressure on other economic sectors. Encompassing gasoline prices, overall transportation costs rose at a year-over-year inflation rate of 7.8 percent in July.

Grocery Inflation Slowed, But Is Still Higher Than the Headline Rate

If you’re seeking relief on your grocery bill, there are reasons to be cautiously optimistic, as prices for food purchased from stores increased at a slower pace in July (3.1 percent) than in June (3.9 percent). However, overall grocery inflation is still quite high, sitting just above the headline inflation rate of 3.0 percent.

Of course, rising grocery costs vary between food types. Certain food types saw slower price growth in July than the previous month, including fresh vegetables (3.9 percent) and chicken (0.3 percent). Meanwhile, the price growth for fresh fruit jumped to 6.1 percent in July, up from 1.7 percent in June.

Prices for Flights and Travel Tours Rose

Anyone who has booked a flight in recent months will not be surprised to learn that air transportation costs continue to rise. In July, prices for air transportation rose 12 percent year over year, following a 9.6 percent increase in June. Gas prices contributed to flight costs, driving the price of jet fuel ever higher.

This could be particularly important for newcomers who are planning flights to or from Canada in the near future. It’s hard to predict how long fuel prices will remain high (or if they might climb higher), so it’s crucial to budget accordingly.

Similarly, travel tours also saw prices increase much faster than the previous month. In July, travel tour prices rose at a pace of 15.2 percent compared with 6.8 percent in June. This was partially due to more expensive hotels and flights to certain destination cities associated with the July hosting of World Cup matches.

Live in Ontario? Your Inflation Rate Is More Moderate

In Ontario, the inflation rate was 2.0 percent, exactly the same as in the month of June, and well below the national average. However, Ontario was the only province whose rate did not increase from June to July and the only other province to come in below the national headline rate was British Columbia at 2.9 percent.

All other provinces and territories saw inflation rates above 3.0 percent, with Nova Scotia and the Yukon eading the pack with price growth of 5.0 percent and 5.5 percent respectively.

How Can Newcomers Plan for Inflation?

The rate of inflation is not in your control. However, with careful financial and life planning, you can prepare yourself to tolerate changes in inflation and interest rates.

At its simplest, the best way to prepare is to follow the core principles of financial planning and budgeting. As a newcomer you have three financial stages to plan for: pre-arrival, settling in, and building your wealth.

To lower your stress in all three stages, you need to prepare for the cost of living in Canada. Start by using the Moving2Canada Budget Calculator to help determine a budget for your Canadian expenses.

Make sure that your savings can cover your expenses during the move and that you prioritize finding employment that meets your budgetary needs. If not, you may have to find ways to reduce your expenses.

Once you’re settled into Canadian life, focus on building an emergency fund. This fund can help you cover expenses in the case of financial hardship, like, for example, if the cost of gasoline skyrockets and you need a few months to adjust your budget or if you need to travel home unexpectedly.

You can dive deep into financial planning through our guide on how to manage your finances as a newcomer to Canada.