Consumer price index sees slowest growth in more than three years
Canada’s inflation rate landed squarely on the central bank’s 2% target in August, the slowest pace of annual growth for over three years.
Statistics Canada said on Tuesday that the overall consumer price index (CPI) had cooled to its lowest level since February 2021, with two inflation measures closely tracked by the Bank of Canada also moderating. CPI-trim fell to 2.4%, down from 2.7%, while CPI-median dropped by 0.1% to 2.3%.
The figures were lower than analysts had expected. A poll conducted by Reuters revealed expectations of a 2.1% CPI reading for the month.
Lower gasoline prices were the main factor behind the continued cooling, although broader pressures continued to ease. Shelter costs, which have contributed significantly to inflation over the past year, are still rising notably: home rent prices jumped 8.9% year over year, while mortgage interest costs were 18.8% higher in August than the same time in 2023.
The latest inflation figures arrive against the backdrop of a series of interest rate cuts by the Bank of Canada, with the central bank having trimmed its benchmark rate by a total of 75 basis points in three consecutive summer cuts.
Royal Bank of Canada (RBC) economists Nathan Janzen and Abbey Xu said in a note after the release of the inflation figures that the path to further rate drops by the Bank remained clear. “We continue to expect a gradual rate cutting path (25 basis points per meeting) down to a 3% overnight rate,” they wrote, “with risks tilted to potentially larger cuts if the economy softens significantly further.”
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