OTTAWA, Aug 15 Reuters Canada39;s annual inflation rate surged more than expected to 3.3 in July as core measures eyed by the central bank remained stubbornly high, data showed on Tuesday, increasing the likelihood of another interest rate increase.

Analysts polled by Reuters had forecast inflation would rise to 3.0 from the 27month low of 2.8 recorded in June. The consumer price index was up 0.6 on a monthovermonth basis, Statistics Canada said, also higher than a forecast of a 0.3 gain.

The average of two of the Bank of Canada39;s core measures of underlying inflation, CPImedian and CPItrim, came in at 3.65 compared with 3.70 in June.

Statscan said the rise in headline inflation was mainly attributable to a baseyear effect in gasoline prices, as a large monthly decline in July 2022 was no longer affecting the 12month movement.

I think we39;re getting another round of spiraling upside risks to inflation in Canada, said Derek Holt, vice president of capital markets economics at Scotiabank. Hikes aren39;t done in my opinion.

Money markets increased bets for a quarterpercentagepoint rate hike in September. They saw a 35 probability immediately after the release of the inflation data, up from 22 beforehand, and then settled back to a 31 chance.

The Canadian dollar was trading 0.1 lower at 1.3465 to the greenback, or 74.27 U.S. cents, after touching a oneweek low at 1.35 before the data.

The bank hiked its benchmark overnight rate to a 22yearhigh of 5.0 in July after…