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CPI inflation in July was stronger than expected, largely because of temporary factors. These include higher prices for air travel, mobile phones, and some food items, which are offsetting the effects of lower gasoline prices. Measures of core inflation all remain around 2 per cent.In sum, Canada economy is operating close to potential and inflation is on target.

The surprise was both in terms of the quantum and the decision to move away from multiples of 25 bps for rate changes. The decision was not unanimous as four members voted for it while two members preferred to keep the reduction to 25 bps. The policy stance was maintained as accommodative..

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