Statistics Canada said Tuesday that Canada’s inflation rate fell to 2 per cent in August, finally meeting the Bank of Canada’s long-held goal of keeping price growth in check.
The central bank began raising interest rates aggressively in April 2022 to curb soaring inflation, and in July it implemented its first rate cut since March 2020.
“Our confidence that inflation will continue to move closer to our 2 percent objective has increased in recent months,” Macklem said at the time.
Last month’s 2% growth was the slowest since February 2021. The Bank of Canada’s preferred measure of core inflation also fell a notch.
“Inflation remains no longer a threat and the Bank of Canada should focus going forward on stimulating the economy and stemming the rise in unemployment,” Andrew Grantham, senior economist at CIBC, wrote in a client note.
“We have 200 more [basis points] “There’s a chance we could see interest rates cut between now and the middle of next year.”
Inflation fell slightly in August, mainly due to a drop in gasoline prices, which are known to be volatile. Excluding gasoline, inflation stood at 2.2%.
Mortgage rates and rents are the biggest factors
The data agency noted that mortgage rates and rents were the biggest contributors to the consumer price index in August, as has been the case for a long time, although growth in mortgage rates has slowed.
Grantham noted that if mortgage interest costs were excluded from overall inflation, the inflation rate would have been 1.2% year-on-year.
Consumers paid 2.4% more for groceries in August, a result of what economists call the base year effect — comparing prices in a particular month with the same month a year ago.
Meanwhile, unusually for a back-to-school shopping month, prices of clothing and footwear fell and the pace of increases in electricity prices slowed.
The Bank of Canada next meets for interest rates on Oct. 23. Some economists say the question isn’t whether the central bank will cut rates, but whether the cut will be by 25 basis points or 50 basis points.
