2017.09.2421:43:00UTC+00Mixed Canada Economic Data Opens Doors for more Rate Hikes

Canadian retail sales volumes dropped in July, indicating a softer pace of expansion at the beginning of the third quarter, although the acceleration in inflation in August still provides the central bank with room to hike interest rates once again.

A moderation in growth heading into the third quarter is anticipated following a solid first half of 2017 which made Canada a Group of Seven leader.

The strong performance caused the Bank of Canada to hike interest rates twice so far this year. Economists are trying to assess whether the central bank will hike rates once more by the end of the year or wait until 2018 to tighten.

Latest data revealed that total retail sales increased 0.4 percent. Although it surpassed expectations, economists expected a 0.2 percent drop in volumes, which implies that economic expansion was probably unchanged in July.

The annual inflation rate increased to 1.4 percent in August from 1.2 percent in July.

Two out of three of the Bank of Canada's core gauges also increased, implying that inflation is stabilizing after recent weakness, according to economists.

Market chances of a hike in October fell to 37.7 percent from 41.6 percent ahead of the data release, although traders still imply an 83 percent likelihood of a rise in December.

The Bank of Canada's CPI common measure increased to 1.5 percent, and the CPI trim rose to 1.4 percent. CPI median was steady at 1.7 percent.