ottawacanadas annual inflation rate rose at a slower pace in august for a second consecutive month due to declining gasoline prices though consumers paid more for most goods and services including seeing the highest price increases for groceries since 1981 the consumerprice index increased 7 on a yearoveryear basis in august statistics canada said tuesday versus a 76 rise in july and 81 climb in june the august report fell short of market expectations for a 73 increase according to td securities on a monthovermonth basis the index declined 03 from july the average of the bank of canadas preferred measures for underlying core inflation measured 523 in august down slightly from a record 543 in the previous month core inflation provides a measure of price changes that excludes volatile goods like food and energy transportation and shelter prices drove the deceleration in consumer prices in august moderating the slowing in prices were sustained higher prices for groceries which rose by 108 on a year earlier the fastest pace since august 1981 statistics canada said prices for nondurable goods also rose 108 but decelerated from a year ago due to lower prices at the pump the agency said services associated with travel and shelter contributed the most to the slowdown in serviceprice growth which saw a 55 increase statistics canada said prices for durable goods such as passenger vehicles and appliances rose 6 but also grew at a slower rate in august the agency said prior to tuesdays inflation figures the bank of canadas senior deputy governor signaled that more rate increases are likely given the outlook for inflation we continue to judge that the policy interest rate will need to rise further carolyn rogers said during a sept 8 speech in calgary the day after the bank of canada increased its benchmark rate by 75 basis points to 325 as the effects of tighter monetary policy work through the economy we will assess how much higher interest rates need to go to return inflation to target cibc economics said the august report isnt likely to change the central banks mind even after todays deceleration the annual rate of inflation remains well above the bank of canadas target and as such further interest rate hikes are still in the cards cibcs andrew grantham said in a research report however a clearer gap appears to be opening up between canadian and us inflation trends which should bring a lower peak from the bank of canada than the federal reserve the us annual cpi rose 83 in august down from 85 in july and from 91 in june which was the highest inflation rate in four decades