Canada’s Inflation Rate Drops to 2% in August, Meeting Bank of Canada’s Target
In a significant economic milestone, Canada’s inflation rate fell to 2% in August, achieving the Bank of Canada’s long-term target for the first time in years. This marks the slowest pace of inflation growth since February 2021, largely driven by a decline in gasoline prices.
The Bank of Canada has been raising interest rates aggressively since 2022 to combat inflation, and this decrease reflects the success of those efforts. Mortgage interest and rental costs continue to be major contributors to inflation, although the rate has slowed. Without mortgage interest factored in, inflation would have been just 1.2%.
Grocery prices rose by 2.4% compared to last year, while clothing and footwear prices fell, which is unusual for the back-to-school shopping season. Economists are now speculating whether the Bank will cut rates in its upcoming October meeting, with the possibility of a 25 or 50 basis point reduction.
As inflation stabilizes, the central bank’s focus may shift to addressing rising unemployment and stimulating economic growth.