Economists expect that the inflation rate in Canada may have fallen again last month, according to economists who anticipate that the Bank of Canada will continue to lower interest rates throughout the fall.

The Canadian Statistics Agency is set to release the Consumer Price Index report for July tomorrow, Tuesday, and forecasters expect to see a slowdown in inflation to 2.4 percent from 2.7 percent in June.

James Orlando, the director of economics at TD, confirmed that despite upward pressure from gasoline and food prices, he still expects the annual rate to decline due to base year effects, which indicate how price movements from a year ago impact the overall inflation calculation.

He added, “This is occurring against the backdrop of a really strong pullback in the base effects (year) from last July, when inflation spiked significantly.”

The noticeable slowdown in price growth this year has strengthened confidence among economists and the Bank of Canada that inflation will continue to decline in the coming months, giving the central bank the green light to continue cutting the benchmark interest rate.

“We need to see something completely different from what we were looking at in this inflation reading to take any type of rate cut off the table in September,” said Tiago Vieira, a macroeconomic strategist at Desjardins.

He noted that Desjardins expects the annual inflation rate to decrease to 2.5 percent in July.

The Bank of Canada, which has lowered its key interest rate at its last two meetings, indicated that it will continue to cut rates as long as price growth continues to decline.

The central bank's shift to lowering interest rates comes amid a faltering economy, as businesses and consumers pull back on spending.

At the same time, the labor market has been hit by stagnation, leading the unemployment rate to rise to 6.4 percent in July.

Governor Tiff Macklem stated in the recent Bank of Canada interest rate decision announcement that as inflation approaches its 2 percent target, the central bank is increasingly considering the risks associated with keeping interest rates high for too long.

Macklem remarked in the press conference following the meeting on July 24, “This need for a recovery in growth was part of our decision to lower the interest rate today.”

Forecasters now widely anticipate that the central bank will cut interest rates at every interest rate meeting this year.

Assuming the bank lowers the rate by a quarter point at each meeting, it would reduce the key interest rate to 3.75 percent.

He added, “There's not much in the economy that makes us believe inflation will rise again at the moment. So I think it just reinforces expectations of continued rate cuts at a pace of 25 basis points per meeting.”

The annual inflation rate has remained within the Bank of Canada's target of 1 to 3 percent since January, a welcome development after a historic surge in price growth.

The bank forecasts that inflation will return to the 2 percent target next year.

The slowdown in inflation in Canada is part of a larger global trend that allows central banks to lower or contemplate lowering interest rates.