The annual inflation rate remained unchanged in July at 2.2 per cent, giving the Bank of Canada some breathing room for its September decision on interest rates.
The annual inflation rate for the consumer price index has stayed at 2.2 per cent since April.
Most of the inflation in July was pushed by the increasing costs of home ownership, says Statistics Canada.
In a commentary Tuesday, Douglas Porter of BMO Economics said the central bank will view the tame inflation data positively.
"This benign result is clearly good news for the Bank of Canada and will give them greater comfort as they wait on the sidelines for the storm to pass at the Sept. 5 decision date (on interest rates),'' he said.
The core inflation rate -- which excludes volatile items and doesn't count changes to indirect taxes -- was at 2.3 per cent in July, following a 2.5 per cent increase in June.
The Bank of Canada studies the figure when setting interest rates and likes to see it at just two per cent -- something that has not happened in almost a year.
"While we've seen temporary dips before in Canadian core inflation in the past two years, only to see it come roaring back even stronger than before, it appears that underlying price trends will remain moderate for a few months yet," said Porter.
"Even so, inflation remains stubbornly above their two per cent target, and that's a high hurdle before the bank will seriously consider cutting rates."
BNN's Michael Kane said Tuesday that many economists are suggesting that the Bank of Canada may have to just accept the fact that the inflation rate is not coming down.
"If it's above 2 per cent they have a tendency to lean towards raising interest rates but in this environment where we've had this credit squeeze and the problem with the liquidity in the markets they have many other things to take into consideration before they make a move on interest rates," he said.
On a month-to-month basis, prices rose 0.1 per cent between June and July.
Higher prices for women's clothing, traveller accommodations and higher mortgage interest costs last month were mostly offset by lower prices for cars, trucks, natural gas and fresh vegetables.
Annually, the cost of home ownership continues to be the main driver for inflation -- which would be 1.9 per cent without mortgage costs.
The cost of mortgage interest rose six per cent since July 2006 -- the largest increase since 2000.
Homeowners' replacement costs, which cover worn-out structural portions of homes and are tied to new housing prices, jumped 6.2 per cent in July after a 6.1 per cent increase in June.
Property taxes and rent increases also helped push up the overall inflation rate.
Food costs were up 2.7 per cent last month.
With files from The Canadian Press
