Canada’s Inflation Moderates to 2% YoY: First Price Drop in August Since 1971
The Bank of Canada has cut its benchmark interest rate three times in recent months, reducing it from 5% to the current 4.25%.
Canada’s annual inflation rate moderated to 2% in August, hitting the central bank’s target and marking its lowest level since February 2021, according to official data released on Tuesday.
This moderation is “partly” due to a decrease in gasoline prices, Statistique Canada stated. Gasoline prices fell by 5.1% in August, following a slight increase of 1.9% in July.
“This is the first time since 1971 that a price drop has been recorded in August,” the official agency noted.
The Bank of Canada has cut its benchmark interest rate three times in recent months, reducing it from 5% to the current 4.25%. Inflation is not seen as a threat, and the Bank of Canada is expected to focus on stimulating the economy and managing rising unemployment.
Analysts continue to forecast a gradual reduction in rates (by 25 basis points per meeting) to reach 3%.
More to the south, the U.S. Consumer Price Index (CPI) decreased by 0.4 percentage points in August to 2.5% year-on-year, still above the Federal Reserve’s 2% target. Despite this, it represents a significant improvement from the 2.9% recorded in July, partly due to falling gasoline prices. The Fed continues to maintain high interest rates to bring inflation down to its target level.
Core inflation, which excludes the volatile prices of food and energy, remained at 3.2% year-on-year, while it increased by 0.3 percentage points on a monthly basis.
The Bureau of Labor Statistics (BLS) reported that the housing index rose by 0.5% in August, which was the main driver behind the overall increase in prices. Housing costs have accumulated a 5.2% increase year-on-year.
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