Canada's annual inflation rate dropped to 2.5%, aligning with forecasts and suggesting a potential third interest rate cut in September. The consumer price index report highlighted lower prices in travel, vehicles, and electricity, while shelter costs remain a significant inflation driver, though their growth slowed to 5.7%. The Bank of Canada is expected to continue cutting rates, with the next announcement on September 4. Economic conditions and GDP data will influence the extent of these cuts, with a weaker GDP possibly leading to a larger reduction.