Capital Economics is estimating that inflation has finally peaked, but it also said that won’t be enough for the Bank of Canada to take its pedal off the metal in terms of hiking interest rates.

The latest inflation data for June showed consumer prices jumped 8.1 per cent on an annualized pace. However, there were “some encouraging signs in the data,” according to Stephen Brown, senior Canada economist at Capital Economics.

“The increase was smaller than the consensus estimate of 8.4 per cent and, while the large upward revision to CPI-common threw a wrench in the works, the [Bank of Canada] was probably still pleased to see that an average of the three core measures rose by only 0.1 percentage-point in June, the smallest increase in eight months,” he wrote in a note to clients Friday.

Brown also noted his own calculations indicated the CPI-trim index rose a more modest 0.3 per cent in June from the previous month – closing in on a level necessary for core inflation to eventually fall back toward the top end of the central bank’s inflation target range of one to three per cent.

After a larger-than-expected full-point interest rate hike in July, Bank of Canada Governor Tiff Macklem this week said he expects inflation to continue to run hot for the rest of the year.

“We know gasoline prices came down in July; so a month from now when StatsCan publishes July inflation, it probably will come down a bit but, look, unfortunately, inflation is probably going to start with a seven for the rest of the year. It is going to be painfully high,” Macklem told CTV’s Evan Solomon in an interview following the latest inflation data release from Statistics Canada.

In the interview, Macklem also reiterated that the bank will likely raise its benchmark rate to three per cent or “a little bit over,” from the current 2.5 per cent level.

“We suspect the bank will probably err toward raising interest rates into a slightly restrictive territory at the next meeting, to send a clear message that it remains intent on bringing down inflation despite the risks to the housing market,” Brown said.