Canada’s inflation rate slowed to 1.7 per cent in July, but economists remain in a “wait and see” mode when it comes to the future of interest rates.

The Canadian dollar hit its lowest in almost three weeks against its U.S. counterpart on Tuesday as oil prices fell and cooler domestic inflation data raised expectations the Bank of Canada would cut interest rates in the coming months.

Inflation eased slightly in July, but core measures remain sticky, leaving economists doubtful the Bank of Canada will change course in September.

Canada’s annual inflation rate fell to 2.9 per cent in January, not only much lower than Bay Street estimates, but marking a return to the Bank of Canada’s target range.

The Canadian dollar was barely changed against its U.S. counterpart on Monday as oil prices rose and investors awaited domestic inflation data that could guide expectations for the Bank of Canada policy outlook.

Although inflation in Canada eased to the Bank of Canada’s 2% target in August, Royal Bank of Canada economists aren’t partying. They argue 2024’s 2% inflation isn’t 2019’s 2%.

Statistics Canada will issue the Consumer Price Index (CPI) for July on Tuesday. This will attract the market's attention since it will provide the Bank of Canada (BoC) with fresh information on how inflation is changing, which they use to set interest rates.

Canada's main stock index inched lower on Monday as investors avoided big bets ahead of domestic inflation data due on Tuesday and a key U.S. central bank conference starting on Friday. At 9:55 a.m. ET (1355 GMT),