Consumer price inflation cooled as gasoline prices fell by the most since the start of the pandemic, though underlying price pressures will likely push the Bank of Canada to continue delivering aggressive rate hikes.

The consumer price index rose 7.6 per cent in July from a year earlier, Statistics Canada reported Tuesday in Ottawa. The inflation gauge increased 0.1 per cent from a month earlier, the seventh straight gain. Both numbers matched the median estimates in a Bloomberg survey of economists.

While yearly inflation has possibly peaked, the persistently broad pressures could still prompt the central bank to deliver another outsized increase to its policy interest rate on Sept. 7.

Bonds sold off, with the benchmark two-year yield rising about 8 basis points to 3.316 per cent as of 11:36 a.m. in Toronto. The Canadian dollar rose to $1.2878 per U.S. dollar from about $1.29 before the release.

The average of core measures -- often seen as a better indicator of underlying price pressures -- climbed to 5.3 per cent, a record in data dated back to 1990, from an upwardly revised 5.23 per cent in June. Service inflation rose to 5.7 per cent, and Statistics Canada said “upward pressure on prices remained broad-based.”

“It is the third-highest print in the past four decades,” economist David Rosenberg, founder of Rosenberg Research & Associates, said on BNN Bloomberg Television. “There’s nothing here -- even when you look through the various components -- that’s going to knock the Bank of Canada off its aggressive posture.”

Swaps trading showed the odds of a 75 basis point hike from the Bank of Canada next month rose above two-thirds after the release, from just over a third earlier in the morning. The bank delivered a surprise full percentage increase to borrowing costs in July, which officials termed a “front-loading” of hikes.

Tuesday’s data are in line with the Bank of Canada’s estimates of inflation, which it sees averaging about 8 per cent through the third quarter of 2022 before slowing.

Still, if headline yearly prices continue to cool, it may give the central bank some breathing room. Policy makers led by Governor Tiff Macklem could pause their aggressive hiking cycle after borrowing costs rise into restrictive territory while they assess the impacts of tightening on economic growth.

On average, consumer price increases continued to exceed the year-over-year increase in hourly wages of 5.2 per cent in July, the statistics agency said.

Adjusting for seasonal factors, the consumer price index rose 0.3 per cent in July, down from 0.6 per cent in June and 1.1 per cent in May. The common component of the Bank of Canada’s core measures of inflation rose to a 5.5 per cent yearly clip after being revised upward for most of 2022. The metric continues to be volatile as price behaviors evolve post-pandemic.

Canadian and U.S. inflation have been rising almost in tandem. U.S. inflation, reported last week, decelerated in July by more than expected. The consumer price index increased 8.5 per cent from a year earlier, cooling from the 9.1 per cent advance in June, while prices were unchanged from the prior month.

Similar to the U.S., falling prices for gasoline in Canada were major contributors to the cooling. The 9.2 per cent monthly drop at Canadian pumps was the biggest decline since April 2020, the statistics agency said. Stripping away energy and food prices, yearly inflation rose 5.5 per cent, up from 5.3 per cent in June.

“While inflation seems to finally have started its long descent, the acceleration in inflation excluding food and energy will be a concern for the Bank of Canada,” Karyne Charbonneau, an economist with Canadian Imperial Bank of Commerce, said in a report to investors.