Canadianinflationslowed in July as consumers paid much less for gasoline, marking what could be the start of a long journey back to low and stable rates of price growth.

The Consumer Price Index rose 7.6 per cent in July from a year earlier, Statistics Canada said Tuesday. That was down from8.1 per cent in June, the highest inflation rate in nearly 40 years. On a monthly basis, the change in CPI was the smallest since December, 2021.

Gas prices, while still much higher than last year, fell 9.2 per cent in July from June, making the biggest contribution to lower headline inflation. August is bringing more relief at the pump, too: The national average price for regular unleaded gas was $1.73 a litre on Monday, down 9 per cent from the average retail price in July, according to data from Kalibrate Technologies.

Inflation slowed to 7.6% in July. Here's what that means for the cost of living in Canada

Still, other details in Tuesday's report were less encouraging. Groceries rose at an annual rate of 9.9 per cent in July, accelerating from 9.4 per cent in June. Rents increased 4.9 per cent, the most since 1989. And natural gas prices jumped by a whopping 43 per cent, which Statscan attributed in part to the Ontario Energy Board's approval of rate increases.

Moreover, the average of the Bank of Canada's core measures of annual inflation - which strip out volatile price changes - rose to 5.3 per cent from 5.2 per cent. Financial analysts said those details underscored why the central bank is certain to keep hiking interest rates.

"It's great that headline inflation is moving in the right direction as energy prices ease," said Leslie Preston, managing director at TD Economics. "But there was very little cooling in core inflation. And I think it's a reminder that the Bank of Canada needs to continue to raise rates to rein in inflationary pressures."

Similar to Canada, the U.S. reported an easing of inflation last week, with the annual rate falling to8.5 per cent in Julyfrom 9.1 per cent in June. In addition to gas, several key commodities - including wheat and lumber - have tumbled this summer, as have shipping rates, offering some modicum of relief to companies and households.

At the same time, inflation remains uncomfortably high and could take years before returning to desired levels. TheBank of Canadaprojected in July that inflation won't return sustainability to its 2-per-cent target until late 2024. Financial analysts expect the bank to make another hefty rate hike in September, perhaps by half or three-quarters of a percentage point. The bank's policy rate is now at 2.5 per cent, the highest since 2008.

Central bankers are trying to engineer a "soft landing," in which they hike interest rates to slow demand and tame inflation, but without sending the economy into a recession. "The path to this soft landing has narrowed," Bank of Canada Governor Tiff Macklem said in July, citing persistently high inflation that "requires stronger action now" via large rate hikes.

Canada's economic growth has slowed considerably in recent months, while the country's sizzling housing market has turned cold. The odds of a recession are rising, economists say, although Royal Bank of Canada is the sole lender to predict that outcome by next year.

"I certainly don't think we're in a recession at all," Pedro Antunes, chief economist at the Conference Board of Canada, said in a recent interview. "The reason I think we may avoid a recession is in part because labour markets are still in exceptionally good shape."

Canada shed jobs in June and July, although the country's unemployment rate remains at 4.9 per cent - the lowest in more than four decades - demonstrating how the lack of available workers continues to be a pressing issue for many employers.

QUESTION

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