Consumer prices rose 3.4% in July 2008 compared with July 2007, an increase from the 3.1% rise recorded in the 12 months to June 2008, Statistics Canada reported today.

Higher gasoline prices continued to exert the strongest upward pressure on consumer prices.

With gasoline factored out, the one-year increase in prices was 2.1%, up from the 1.8% figure seen in June.

Driven by higher world prices for oil, prices at the gas pumps rose 28.6% between July 2007 and last month.

Natural gas costs were also 25% higher year-over-year, partly due to a decline in prices that occurred at the same time last year and to recent increases related to oil prices.

Mortgage interest charges advanced 8.5% from July 2007 to July 2008, but that was down from the nine% increase posted in the 12 months to June.

“The slowdown in the rise in mortgage interest cost was due more to a softening of new housing prices rather than to lower mortgage interest rates,” StatsCan said.

Food prices were also higher. The one-year increase in prices was 4.3%, led by a 13.2% rise in the cost of bakery products.

The core rate of inflation — which excludes some of the more volatile components and is closely watched by the Bank of Canada for interest-rate setting — stood at 1.5% from July 2007 to July 2008. July was the fourth straight month that the one-year core index increased 1.5%.