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Food Inflation Remains a Key Concern in Canada as Grocery Prices Stay Elevated, BMO Says

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Food inflation continues to put pressure on Canadians and remains a major concern, even as broader inflationary pressures eased in July, according to BMO Capital Markets in a note.

Grocery price growth was relatively modest in July on a seasonally adjusted basis, but food inflation continued to add to overall consumer price index pressures, according to the bank, citing Monday's CPI data. Grocery prices rose 3.1% year over year in July and are now roughly 30% higher than they were five years ago.

"Even as the inflation rate comes down, your grocery bag doesn't get any cheaper -- hence why Canadians still feel the pain," wrote BMO Senior Economist Robert Kavcic in Monday's note.

Looking ahead, grocery prices could remain under pressure later this year as higher costs further up the supply chain continue to filter through to consumers, added the bank.

Weather-related risks, particularly the potential impact of a "super" El Nino, could add to uncertainty and increase the risk of further food price pressures into next year.

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