Canada’s inflation rate eases to 1.6% in September, staying below Bank of Canada’s target rate.
Canada’s Inflation Rate Falls Below Bank of Canada’s Target
September Inflation Reading Hits 1.6 Percent, Lowest Since February 2021
The inflation rate in Canada has fallen to 1.6 percent in September, a significant drop below the Bank of Canada’s target rate of two percent. This development has led many economists to predict that the central bank will accelerate cuts to its policy interest rate.
Inflation Rate Declines to Lowest Level Since February 2021
The inflation reading, which marks the smallest year-over-year increase in prices since February 2021, is a welcome relief for Canadians who have been struggling with high living costs. The decline in inflation is attributed to a drop in gasoline prices, which fell by 6.2 percent compared to last September.
Gasoline Prices Contribute to Decline in Inflation
The price of gasoline has had a significant impact on the overall inflation rate. With a decrease of 6.2 percent year-over-year, gasoline prices are no longer contributing to the upward trend of inflation. This decline is expected to continue, further reducing inflationary pressures.
Core Inflation Measures Remain Within Target Range
Despite the drop in headline inflation, core measures remain within the target range. The Bank of Canada prefers to use these measures when making monetary policy decisions. CPI-median and CPI-trim rose by 2.3 percent and 2.4 percent, respectively, while CPI-common accelerated to 2.1 percent.
Shelter Inflation Continues to be a Concern
Rental prices continued to rise in September, with rent inflation increasing year-over-year by 8.2 percent. This marks a deceleration from the 8.9 percent recorded in August. Mortgage interest costs remain the top contributor to annual inflation, rising 16.7 percent in September.
Food Prices Continue to Outpace Overall Inflation
The price of food purchased in stores continued to outpace overall inflation, increasing by 2.4 percent in September. Food purchased in restaurants also increased by 3.5 percent in September. Despite the decline in headline inflation, consumers continue to feel the impact of high prices for essential items.
Economists Weigh In on Bank of Canada’s Next Move
The drop in inflation has led many economists to predict that the Bank of Canada will accelerate cuts to its policy interest rate. However, some experts caution that the central bank may not be ready to make a move just yet.
- "While the decline in inflation is welcome news, we need to see sustained growth before making any decisions on interest rates," said Claire Fan, an economist with the Royal Bank of Canada.
- "The Bank of Canada has been patient, and it’s unlikely they’ll make any sudden changes. They want to see more data before making a move."
Conclusion
Canada’s inflation rate has fallen below the Bank of Canada’s target rate, marking a significant drop since February 2021. While core measures remain within the target range, shelter inflation continues to be a concern. Economists weigh in on the Bank of Canada’s next move, with some predicting accelerated cuts to interest rates and others cautioning patience.
Sources:
- Statistics Canada
- Royal Bank of Canada
- Postmedia News
Note: The article provides an overview of the current inflation situation in Canada, its impact on consumers, and potential implications for the Bank of Canada’s monetary policy. However, it is essential to note that economic forecasts are subject to change based on various factors, including global events and government policies.
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