The inflation rate in Canada slowed year-over-year to 7.6 percent in July, largely driven by falling gasoline prices even as food, rent, and travel costs continued to rise.

Economists pointed to the 40-year high of 8.1 percent in June as a potential peak for the overall inflation rate, which had been rising every month since June 2020.

Although gasoline prices rose 35.6 percent in July compared to the previous year, this was down from a huge 54.6 percent increase in June, according to Statistics Canada on Tuesday.

However, Canadians are feeling the inflation crisis as food prices rose by 9.9 percent compared to last year, the fastest pace since August 1981.

In another sign of slowing price gains, the agency said the monthly increase in July was the smallest since December 2021.

The trend also reflects the latest inflation data from the United States, which saw the rate of price increases fall to 8.5 percent in July from 9.1 percent the previous month—also largely due to falling pump prices.

People are still absorbing price increases larger than they have had in decades, with rising grocery, rent, and medical care costs.

To Nguyen, an economist at RSM Canada accounting and consulting, said that the "spread" of inflation across the economy means there are still ways to go before the pressure on Canadians’ finances eases significantly.

Nguyen said in a note, "It will be some time before households can breathe a sigh of relief."

The average hourly wage rose 5.2 percent in July compared to last year. The agency said the pressure is due to a combination of factors, including ongoing concerns about a global economic slowdown, increased COVID-19 public health restrictions in China, and slowing gas demand in the United States.

However, inflation is still much higher than the Bank of Canada's target of 2 percent. The central bank is watching the latest inflation reading while preparing for its next interest rate announcement on September 7, where it is expected to raise the key interest rate by three-quarters of a percentage point.

Bank of Canada Governor Tiff Macklem said in an opinion piece published in the National Post on Tuesday that although inflation appears to have peaked, it remains very high, affirming that the central bank must take action to further cool things down.

Piata Karanche, chief economist at TD, said that the central bank is paying more attention to the core inflation measures, which are considered less volatile than the headline number—and have remained relatively unchanged since June.

She said consumer spending was relatively strong in Canada despite rising inflation, with consumer spending in the first half of the year rising at twice the rate of the United States.

Trevor Tombe, economics professor at the University of Calgary, said it is unlikely that the latest inflation data will change the Bank of Canada's plans regarding its next interest rate decision, noting a lag between interest rate decisions and their economic impact.

As more Canadians travel during the busy summer season, airfares rose about 25 percent in July compared to the previous month.

Accommodation prices for travelers increased by about 50 percent since last year, with the largest price increase in Ontario.

Here is what happened in the provinces (previous month in parentheses):

- Newfoundland and Labrador: 6.9 percent (8.2)

- Prince Edward Island: 9.5 percent (10.9)

- Nova Scotia: 8.7 percent (9.3)

- New Brunswick: 8.0 percent (9.1)

- Quebec: 7.3 percent (8.0)

- Ontario: 7.6 percent (7.9)

- Manitoba: 8.8 percent (9.4)

- Saskatchewan: 8.1 percent (8.1)

- Alberta: 7.4 percent (8.4)

- British Columbia: 8.0 percent (7.9)