Canada’s Inflation Rate Drops to 2.5%

Canada‘s annual inflation rate has slid down to 2.5% last month, which aligns with what economists were expecting. This drop adds weight to talks about another potential interest rate cut come September.

The Consumer Price Index report released today highlights that the cost of travel tours, passenger vehicles, and electricity contributed significantly to this decrease in the inflation rate.

However, shelter costs remain a major concern for many Canadians. They continue to grapple with rising rents and mortgage payments, although the increase has slightly slowed down to 5.7% year-over-year from a prior 6.2% in June.

Since January, inflation has been comfortably below 3%, and it seems to be on a steady downward trend. Andrew DiCapua, a senior economist at the Canadian Chamber of Commerce, notes that while things are improving, Canadians are still feeling the pinch, leading to restrained spending.

DiCapua believes that the Bank of Canada is likely to continue cutting interest rates, especially as inflation shows signs of moderation. Improvements in global supply chains and existing high-interest rates have helped control price increases.

Interestingly, after witnessing soaring rates, grocery prices are rising much more slowly now, only up by 2.1% compared to last year. Meanwhile, prices for clothing and footwear have actually dropped since this time last year.

Despite some prices stabilizing, certain pressures still linger, particularly in sectors that provide services. Prices for services have gone up 4.4% from a year ago, which many economists attribute to higher wages.

Looking ahead, it seems most experts are betting that the Bank of Canada will stick to its course of cutting interest rates. Governor Tiff Macklem has expressed concerns about the risks of maintaining high rates for too long and indicated that the central bank aims to give the economy a boost.

The next opportunity for the central bank to make an announcement is set for September 4.