The Bank of Canada in Ottawa, Ontario, Canada, on July 12, 2023. Canada’s central bank on July 12, 2023, raised its key interest rate by 25 basis points to five percent, its highest level since 2001. While the Bank of Canada acknowledged that global inflation was easing, it explained its decision — which was in line with analyst expectations — by saying: “Robust demand and tight labor markets are causing persistent inflationary pressures in services.” (Photo by Dave Chan / AFP)
Montreal, Canada — Inflation in Canada eased to two percent year-on-year in August, hitting the target set by the country’s central bank and marking its slowest increase since February 2021, official data showed Tuesday.
The easing was due in part to lower gas prices, down 5.1 percent year-on-year after a 1.9 percent increase in July, Statistics Canada said in a statement.But prices of clothes and shoes also dropped month-on-month — a surprise for August when students in Canada are preparing to return to school, fueling demand and usually sending prices up.
“A drop in prices in the month of August has not been observed since 1971,” the government agency said.
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Rent and mortgage interest costs are still the top contributors to the overall increase in prices, it said.
In recent months, the Bank of Canada has lowered its key interest rate three times, from five percent to the current 4.25 percent.
For RBC economists Nathan Janzen and Abbey Xum, the inflation data marks a “clear” path to further interest rate cuts.
“We continue to expect a gradual rate cutting path (25 basis points per meeting) down to a 3% overnight rate,” they said in a note.