After Canada reported inflation data on Tuesday, a couple of major economies from across the Atlantic announced their inflation data for July yesterday. In the UK, inflation rose to its highest level since January 2024, while inflation in Europe held steady at the European Central Bank’s 2% target. As global trade tensions persist, central banks have noted there is some upside risk to inflation, which is making their monetary policy decisions difficult.

• The UK’s annual inflation rate rose to 3.8% in July from 3.6% in the previous month. This marked the highest rate of inflation in the UK since January 2024. The annual core inflation rate, which strips out more volatile items, was also 3.8% in July.
• The price growth for transportation and restaurants in the UK accelerated in July compared to the previous month. This was partially offset by a slowdown in housing prices.
• The Bank of England (“BoE”) needed two votes to make its interest rate decision at its last meeting for the first time in history. The BoE ultimately cut interest rates, while projecting that inflation will move higher.
• Europe’s annual inflation rate was confirmed at 2.0% in July, matching June. Prices for services slowed in July.
• The People’s Bank of China held its one- and five-year loan prime rates steady at 3.00% and 3.50%, respectively, at its August fixing, maintaining its policy interest rates at record low levels.

Threats of higher inflation around the world linger, which has put many major central banks on a wait-and-see approach at recent meetings. It is much the same in Canada, where the Bank of Canada is concerned about the threat of higher inflation in response to trade disruptions, which has kept the bank from cutting rates at its last three meetings.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.