Canada’s inflation cooled in July, but one prominent Bay Street economist said the latest data will compel the Bank of Canada to stay the course with its rate-hiking plans.
“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,” David Rosenberg, the founder and president of Rosenberg Research, said in a TV interview on Tuesday.
Statistics Canada reported Tuesday morning that the consumer price index rose 7.6 per cent year-over-year in July, modestly down from the peak in June when the inflation rate hit a near 40-year high of 8.1 per cent.
"Let's face it, 7.6 per cent headline inflation rate might be off the peak, but when you consider that we were at 4.8 per cent at the end of 2021, we were 3.7 per cent a year ago. So, we're basically double where we were this time last year, and, it is the third-highest print in the past four decades," he said. 
Gasoline prices fell the most since the start of the pandemic, contributing to the cooldown. The cost of living rose 6.6 per cent compared to a 6.5 per cent rise in June.
"I would say that the odds are high after this report that they (the Bank of Canada) do go 75 basis points. I guess there's an outside chance they go can 50 (basis points). We've become almost numb to the fact going 75 or 100 basis points these days is normal. A year ago, going 50 basis points would have been a shock, just to put it in perspective," Rosenberg added. 
The Bank of Canada began to hike interest rates in March to wrestle runaway inflation back down to the two per cent target.
"Shrinking their balance sheets, on top of rate hikes, into an inverted yield curve, is playing with fire as far as the economy is concerned," Rosenberg cautioned. 
"I think a recession is actually unavoidable for the Bank of Canada. It might be desirable to crush inflation because that's their number one priority right now."