UBS Global Research said it expects the Canadian headline consumer price index to tick higher next week, but the bank sees the increase as temporary.
The July headline CPI is forecast to rise 0.4% on a monthly non-seasonally adjusted (NSA) basis, pushing the 12-month rate up to 2.9% from 2.8% in June, according to UBS in a note made available to the media on Thursday. Energy prices are likely to provide another boost to headline inflation.
Retail gasoline prices have since fallen back in August, and if the decline continues, they should once again weigh on headline inflation this month, added the bank.
After falling 0.2% last month, UBS predicts food prices to have risen 0.3% in July on an NSA basis, also adding to the headline print.
The bank estimates core CPI to have risen 0.2% in July on an NSA-adjusted basis, bringing the annual rate down slightly to 1.7% from 1.8% in June. It sees lower prices for recreation, education and reading, as well as transportation, to offset somewhat firmer shelter, health and personal care prices.
The risks are likely skewed to the upside relative to the bank's projections.
Statistics Canada is slated to release the July CPI on Monday.