Inflation appears to have peaked but remains high, and an interest rate hike from the Bank of Canada is widely expected next week. Some economists believe that Wednesday's increase may be the last for a while.

Karen Charbonneau, CIBC's Chief Economist, said: "We believe that by October, we may be in a good enough position for the bank to pause and consider how the economy is reacting," as the September price request comes at a critical time for the Canadian economy.

With gas prices falling, the annual inflation rate settled at 7.6 percent in July, down from 8.1 percent in June. GDP also grew in the second quarter compared to the first three months of the year, although it slowed near the end of the period. Meanwhile, the unemployment rate remains at its lowest level.

Despite the lower inflation rate, Bank of Canada Governor Tiff Macklem said in an article dated August 16 that the highest inflation in 40 years remains a major concern. Macklem stated: "The inflation rate in Canada has decreased slightly, but it is still very high. We know our mission is not over yet and will not be accomplished until inflation returns to the 2 percent target."

Some major Canadian banks expect the central bank to raise the key interest rate by three-quarters of a percentage point, reaching 3.25 percent. The Chairman of the US Federal Reserve also says rate hikes may continue "for some time."

The bank raised the key interest rate by a full percentage point in July — the largest single rate hike since August 1998 after a series of increases that began in March. Previously, the rate had been at 0.25 percent since it was lowered to near zero early in the pandemic.