Inflation is knocking on Canada’s door, and this may mean a slowdown for the iShares MSCI Canada (EWC) exchange traded fund (ETF), as well.

The annual inflation rate rose to its highest since 2003 for our Northern neighbors, mostly because of the higher gas prices for drivers. Consumer prices rose 3.4% from July 2007, and inflation is projected to peak at 4.3% next year, reports Theophilus Argitis for Bloomberg.

Most of July’s inflation can be tied to the rise in energy prices, yet the Bank of Canada’s option to cut interest rates to kick start growth is not an option. The great news for Canadians is that borrowing costs will reamin the same through next year.

Canada’s strong dollar has led to a soaring travel deficit, reports Eric Beauchesne for Canwest News Service. It’s led to $10.2 billion more flowing out of the country than into it. For the time being, the dollar isn’t forecast to weaken, either, and the travel deficit could grow further. As long as their dollar remains strong relative to ours, the country might have trouble attracting American tourists.

EWC is down 7.1% year-to-date.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.