Inflation is trending downwards – but the job isn't done yet, bank says
Canada’s annual inflation rate slowed to 2.8% in June – but the preferred core measures used by the Bank of Canada are proving resilient, according to a new analysis by Royal Bank of Canada (RBC).
The report said that there was a significant decrease in the prices for gasoline and fuel which were below the levels witnessed in June. The costs of food and mortgage interest are still contributing heavily to inflation, although the growth of food prices continued to ease in June. However, mortgage interest costs kept climbing.
While the Bank of Canada’s move to increase interest rates is an effort to mitigate inflation, it is still playing a hand in the spike in inflation through mortgage interest costs, RBC said.
The annual pace of price growth has fallen into the Bank’s target range, although it doesn’t expect it will fall to its 2% goal until the middle of 2025.
Central bank policymakers are still willing to increase interest rates further should it be deemed necessary. However, RBC said that it is expecting the impact of the rate hikes to come gradually over the second half of the year, with a pause on rate increases possible throughout the remainder of the year.
