Another rate cut is appearing increasingly likely
Canada’s annual inflation rate fell to 2.5% in July, its slowest pace for over three years, in a development that likely copper-fastens another Bank of Canada interest rate cut next month.
Statistics Canada data on Tuesday morning showed that the headline rate cooled for a seventh successive month, matching the expectations of economists surveyed by Bloomberg, and hit its lowest level since March 2021.
Month over month, overall inflation inched upwards by 0.4%, while two core inflation measures closely watched by the central bank fell to an average of 2.55%.
Receding shelter costs were the largest contributor to the monthly decline, dropping from 6.2% in June to 5.7% last month, although mortgage interest costs and rent continue to heavily impact the overall figure.
The cost of servicing a mortgage spiked by 21% between July 2023 and July 2024, according to StatCan, while rent prices across the country were 8.5% higher year over year last month.
Still, July’s figures mark a further signal that inflation is on a steady path toward the Bank of Canada’s target rate of 2%, having slid significantly from their 39-year high of 8.1% in the middle of 2022.
The Bank is due to reveal its next decision on interest rates on September 4 – and having trimmed by 25 basis points in each of its last two announcements, it’s expected to introduce a further cut on that date.
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