09:45 AM EDT, 08/20/2024 (MT Newswires) -- Canadian headline prices Tuesday rose 0.4% m/m in July, coming in line with consensus, noted Desjardins, leaving the annual rate of inflation decelerating two ticks to 2.5%.

Clothing and footwear along with telephone services and travel tours were the largest negative contributors to price growth over the year. Rent decelerated for a second consecutive month, which is encouraging given that shelter has been the main area of preoccupying inflation stickiness, said the bank. Meanwhile, used vehicle prices continued to dip, continuing to reflect improving vehicle availability.

Core measures of inflation were relatively stable over the month. Excluding food and energy, prices were up 0.2% in seasonally-adjusted (SA) terms, leaving the 12-month pace of that measure at 2.7%, also falling two ticks and remaining within the central bank's control range.

The Bank of Canada's (BoC) core measures of inflation also showed signs of progress, with median and trim both increasing 0.1% during the month. That saw the year-over-year and three-month annualized rates of both metrics slow.

The breadth of price increases across components also showed more progress in July, stated Desjardins. The share of components growing above 3% on an annual basis fell to 30% from 34% in the prior month and a peak of 78% in 2022.

Conversely, the share of components with annual rates of growth of less than 1% increased to 49% from 46% in June. Notably, there was "significant" progress on services, where the share of components growing above 3% fell from 47% to 41% in July.

All of this bodes well for price stability and will undoubtedly give Canadian central bankers more confidence that inflation isn't accelerating, according to Desjardins.

An inflation report like this seals the deal for another 25bps rate cut at the BoC's September meeting, added the bank. It's also likely to keep central bankers cutting rates for the next few meetings.