The consensus call is for a 0.4% month-over-month increase in the headline rate and a 0.2% rise in the core rate used by the Bank of Canada in setting interest rate policy. The headline rate is expected to be up 3.4% on an annual basis and the core rate is forecast to increase 1.6% year-over-year.

"We're a little north of those numbers," said John Clinkard, Deutsche Bank Securities chief economist for Canada. Clinkard expects to see headline CPI increase 0.5% month-over-month and the core rate rise 0.3%.

The risk is all to the upside, mainly because of the rising price of imports caused by the decrease in value of the Canadian dollar, Clinkard said. U.S. inflation is also on the increase, he said, and will have a spillover effect into Canada.

Laurentian Bank economist Sebastien Lavoie said he doesn't expect "any major, earth-shattering news" from the Thursday CPI report. Inflation is currently running on the high side, he said, and markets are well aware of that fact. "It will still be the case in (the) July (numbers) as it was in June and as it was in May," Lavoie said.

In the longer term headline, inflation will fall back into line with the core rate at around 2%, he said. Economies around the world are weakening and that will continue to put downward pressure on crude oil prices and bring inflation back into target. Industrial economies around the world are shrinking, Lavoie said, "How can oil demand continue to go up?"

CIBC economist Krishen Rangasamy said a July reading of 3.4% on the headline inflation rate would be the highest CPI number in three years, and added that even bigger numbers are on the way. "The rising trend is unmistakable," said Rangasamy. "Inflation is heading higher and could even surpass the Bank of Canada's forecasted peak of 4.3% if, as we expect, energy prices find renewed strength over the coming quarters."

The recent acceleration in food price inflation has put Canada in line with global trends, he said. "We do not expect price pressures to diminish at grocery stores, especially in a month that saw a weaker loonie and hence, a higher import bill."

HSBC Canada economist Stewart Hall said the July report probably won't reflect the lower prices for gasoline seen in the second half of the month. That will show up in the August readings, which "will see gasoline prices plunge."

Motor vehicle prices will continue to dampen on July inflation figures, Hall said, but a number of everyday items including baked goods, fresh fruit and vegetables and clothing will put upward pressure on the CPI.

Hall's forecast for July inflation was in line with the consensus view.

By Geoff Matthews, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Megan Ainscow, This email address is being protected from spam bots, you need Javascript enabled to view it

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