By The Canadian Press

Economists say they found some encouraging signs in the latest inflation numbers but some warn the Bank of Canada might need a bit more convincing to cut its key interest rate next month.

The annual rate of inflation fell to 1.7 per cent in July, Statistics Canada said Tuesday, down from 1.9 per cent in June. The reading was a tenth of a percentage point below most economists’ expectations.

A 16.1 per cent decline year-over-year in gas prices tied mainly to the removal of the consumer carbon price earlier this year fuelled the drop.

BMO chief economist Doug Porter said in an interview that the July consumer price index was a “relatively favourable report” despite some stubbornness at the grocery store and in housing.

July’s consumer price index marks the first of two looks at inflation that the Bank of Canada will get before its next interest rate decision on Sept. 17. The central bank held its policy rate steady at 2.75 per cent in July.

The Bank of Canada has been looking for signs of how Canada’s tariff dispute is affecting inflation, and is particularly concerned with trends in core inflation that strip out influences from tax changes and other volatile inputs.

Statistics Canada said the Bank of Canada’s preferred measures of core inflation held around three per cent in July.

Porter pointed out that another measure of core inflation that strips out influences from food and energy was lower in July, around 2.6 per cent.

Looking at those readings, he said the July CPI report “slightly turned the dial” toward a rate cut in September, aligning with BMO’s expectations.

Financial market odds for a quarter-point rate cut in September increased modestly to around 40 per cent as of Tuesday afternoon, according to LSEG Data & Analytics.

But with core inflation still elevated compared with the headline figure, Porter acknowledged BMO’s call for a cut next month was “a long shot” at this point.

“We need some help in the inflation numbers. We probably need a relatively sluggish jobs number as well,” he said.

CIBC senior economist Andrew Grantham said in a note that the lack of easing in core inflation can mostly be attributed to the base-year effect -- the distortion from price movements last year on a particular month’s annual inflation comparisons.

He said the shorter-term, three-month core inflation readings now show an annualized rate of 2.4 per cent for July.

Grantham said there’s still more data to come before the Bank of Canada’s next rate decision, but the July inflation figures support his call for a quarter-point cut in September.

RBC, meanwhile, is maintaining its call for no more interest rate cuts from the Bank of Canada this year.

Claire Fan, senior economist with RBC, said in a note that the monthly advance in core inflation was less than she was expecting. But she said pressure is still spread broadly through the consumer price index.

Inflation on food from the grocery store accelerated to 3.4 per cent annually in July, up from 2.8 per cent in June.

Confectionary prices rose 11.8 per cent and coffee gained 28.6 per cent to be among the biggest contributors to food inflation last month.

Statistics Canada said poor growing conditions in countries that produce cocoa and coffee beans were to blame for higher costs.

Prices for fresh grapes were up nearly 30 per cent, driving the overall cost for fresh fruit up 3.9 per cent in July compared with 2.1 per cent in June.

Porter said there are some hints that Canada’s tariff dispute with the United States is a factor keeping food inflation elevated, but he stopped short of blaming it for pain at the grocery store.

“I think the bigger story is coffee prices ... chocolate prices and beef prices, and those aren’t really a tariff story. Those are more climate issues,” he said.

Tariffs from the U.S. are driving a bit of “stickiness” in durable goods inflation, Porter noted, particularly in motor vehicles.

In addition to duties placed on some Canadian inputs, U.S. tariffs on vehicles from around the world are driving some “spillover” effects on inflation in Canada, he said.

“The trade war has had an effect on auto prices and autos are a big share of the CPI,” he said.

“So yes, unfortunately we have not totally escaped the trade war in our inflation data.”

Shelter inflation also saw a modest acceleration to three per cent last month from 2.9 per cent in June, marking the first increase in the category since February 2024.

Rent price growth picked up in July, particularly in Prince Edward Island, Newfoundland and Labrador and British Columbia. Lower mortgage costs are still moderating the overall increase in shelter inflation.

Prices for natural gas fell to a lesser degree than in June, thanks mostly to higher costs in Ontario.

Porter said the stubbornness in shelter inflation has been “frustrating,” but market data continues to show rent dropping in major cities across Canada, so he expects further easing in this CPI component through the rest of the year.

This report by The Canadian Press was first published Aug. 19, 2025.

By Craig Lord

Today's release of the July housing data by the Canadian Real Estate Association (CREA) showed good news on the housing front. Following a disappointing spring selling season, National home sales were up 3.8% in July from the month before, with Toronto seeing transactions rebound 35.5% since March. However, the total number of Toronto sales remains low by historical standards.

On a year-over-year basis, total transactions have risen 11.2% since March. 

There is growing confidence that the Canadian economy will resiliently weather the tariff trauma. The Canadian dollar is up, and longer-term interest rates have edged downward in the past ten days. Traders are now anticipating a rate cut by the Federal Reserve in September.

Tuesday's release of the Canadian CPI will provide another data point for the Bank of Canada. Economic growth has held up, in large part because much of the pain from tariffs has been confined to industries singled out for levies, including autos, steel and aluminum.

Shaun Cathcart, the real estate board's senior economist, said, “With sales posting a fourth consecutive increase in July, and almost 4% at that, the long-anticipated post-inflation crisis pickup in housing seems to have finally arrived. The shock and maybe the dread that we felt back in February, March and April seem to have faded," as people become less concerned about their future employment.

New Listings 

New supply was little changed (+0.1%) month-over-month in July. Combined with the notable increase in sales, the national sales-to-new listings ratio rose to 52%, up from 50.1% in June and 47.4% in May. The long-term average for the national sales-to-new listings ratio is 54.9%, with readings roughly between 45% and 65% generally consistent with balanced housing market conditions.

There were 202,500 properties listed for sale on all Canadian MLS® Systems at the end of July 2025, up 10.1% from a year earlier and in line with the long-term average for that time of the year.

“Activity continues to pick up through the transition from the spring to the summer market, which is the opposite of a normal year, but this has not been a normal year,” said Valérie Paquin, CREA Chair. “Typically, we see a burst of new listings right at the beginning of September to kick off the fall market, but it seems like buyers are increasingly returning to the market.

There were 4.4 months of inventory on a national basis at the end of July 2025, dropping further below the long-term average of five months of inventory as sales continue to pick up. Based on one standard deviation above and below that long-term average, a seller’s market would be below 3.6 months, and a buyer’s market would be above 6.4 months.

Home Prices

The National Composite MLS® Home Price Index (HPI) was unchanged between June and July 2025. Following declines in the first quarter of the year, the national benchmark price has remained mostly stable since May.

The non-seasonally adjusted National Composite MLS® HPI was down 3.4% compared to July 2024. This was a smaller decrease than the one recorded in June.

Based on the extent to which prices fell off in the second half of 2024, look for year-over-year declines to continue to shrink in the months ahead.

Bottom Line

Homebuyers are responding to improving fundamentals in the Canadian housing market. Supply has risen as new listings surged until May of this year. Additionally, the benchmark price was $688,700, 3.4% lower than a year earlier. That decrease was smaller than in June, and the board expects year-over-year declines to continue shrinking, it said in a statement.

While many expect the Fed to ease in September, I'm not sure it will happen. The producer price index came in hotter than expected this week. Fed action will depend mainly on the personal consumption expenditures index (PCE), the Fed's favourite measure of inflation, which will be out on August 29. 

US stagflation worries have emerged with the release of the July employment report, which showed considerable weakness, enough to get the head of the Bureau of Labour Statistics fired. The likelihood of a BoC cut will increase if the Fed begins a series of easing moves as the administration is demanding.

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drsherrycooper@dominionlending.ca

METRO VANCOUVER MARKET HIGHLIGHTS

JULY 2025

DETACHED

Active Listings:6,483

Sales 660

Benchmark Price:$1,974,400

Avg. Days On Market:42

TOWNHOUSE

Active Listings:2,755

Sales 459

Benchmark Price:$1,099,200

Avg. Days On Market:30

APARTMENT

Active Listings:7,263

 Sales 1,158

Benchmark Price:$743,700

Avg. Days On Market:35

Download PDF

Sales recovery continues in July

July 2024

2,333

Sold

July 2025

2,286

Sold

(-2%)

Residential property sales in Metro Vancouver

Home sales registered on the MLS® across Metro Vancouver* in July extended the early signs of recovery that emerged in June, now down just two per cent from July of last year.

The Greater Vancouver REALTORS® (GVR) reports that residential sales in the region totalled 2,286 in July 2025, a two per cent decrease from the 2,333 sales recorded in July 2024. This was 13.9 per cent below the 10-year seasonal average (2,656).

"The June data showed early signs of sales activity in the region turning a corner, and these latest figures for July are confirming this emerging trend. Although the Bank of Canada held the policy rate steady in July, this decision could help bolster sales activity by providing more certainty surrounding borrowing costs at a time where economic uncertainty lingers due to ongoing trade negotiations with the US."Andrew Lis, GVR director of economics and data analytics

There were 5,642 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in July 2025. This represents a 0.8 per cent increase compared to the 5,597 properties listed in July 2024. This was 12.4 per cent above the 10-year seasonal average (5,018).

The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 17,168, a 19.8 per cent increase compared to July 2024 (14,326). This is 40.2 per cent above the 10-year seasonal average (12,249).

Across all detached, attached and apartment property types, the sales-to-active listings ratio for July 2025 is 13.8 per cent. By property type, the ratio is 10.2 per cent for detached homes, 16.7 per cent for attached, and 15.9 per cent for apartments.

Sales-to-Active Listings Ratio - July 2025

Detached

10.2%

Attached

16.7%

Apartment

15.9%

Total 13.8%

"With the rate of homes coming to market holding steady in July, the inventory of homes available for sale on the MLS® has stabilized at around 17,000. This level of inventory provides buyers plenty of selection to choose from,” Lis said.

“Although sales activity is now recovering, this healthy level of inventory is sufficient to keep home prices trending sideways over the short term as supply and demand remain relatively balanced. However, if the recovery in sales activity accelerates, these favorable conditions for home buyers may begin slowly slipping away, as inventory levels decline, and home sellers gain more bargaining power.”

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,165,300. This represents a 2.7 per cent decrease over July 2024 and a 0.7 per cent decrease compared to June 2025.

Sales of detached homes in July 2025 reached 660, a 4.1 per cent decrease from the 688 detached sales recorded in July 2024. The benchmark price for a detached home is $1,974,400. This represents a 3.6 per cent decrease from July 2024 and a 1 per cent decrease compared to June 2025.

Sales of apartment homes reached 1,158 in July 2025, a 2.9 per cent decrease compared to the 1,192 sales in July 2024. The benchmark price of an apartment home is $743,700. This represents a 3.2 per cent decrease from July 2024 and a 0.6 per cent decrease compared to June 2025.

Attached home sales in July 2025 totalled 459, a five per cent increase compared to the 437 sales in July 2024. The benchmark price of a townhouse is $1,099,200. This represents a 2.3 per cent decrease from July 2024 and a 0.4 per cent decrease compared to June 2025. 

* Areas covered by Greater Vancouver REALTORS® include: Bowen Island, Burnaby, Coquitlam, Maple Ridge, New Westminster, North Vancouver, Pitt Meadows, Port Coquitlam, Port Moody, Richmond, South Delta, Squamish, Sunshine Coast, Vancouver, West Vancouver, and Whistler.

Greater Vancouver REALTORS® is an association representing more than 15,000 REALTORS® and their companies. The association provides a variety of member services, including the Multiple Listing Service®. For more information on real estate, statistics, and buying or selling a home, contact a local REALTOR® or visit www.gvrealtors.ca.