Canada’s inflation rate fell to two per cent in August 2024, Statistics Canada reported on Tuesday, finally hitting the Bank of Canada’s set target in its long campaign to cool price growth.
The central bank began aggressively hiking interest rates in April 2022 to tame skyrocketing inflation, and made its first rate cut since March 2020 in July.
“Our confidence that inflation will continue to move closer to the two per cent target has increased over recent months,” Macklem said at the time.
Last month’s two per cent rate marks the slowest pace of growth since February 2021. The Bank of Canada’s preferred core measures of inflation also ticked down a notch.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham in a note to clients.
“We continue to forecast a further 200 [basis points] of interest rate cuts between now and the middle of next year.”
Inflation edged down in August mostly due to a drop in gasoline prices, which are considered volatile. When gasoline is excluded, the rate came in at 2.2 per cent.
Mortgage interest, rental costs largest contributors
As has long been the case, mortgage interest and rental costs were the largest contributors to the consumer price index in August, though mortgage interest growth is slowing, the data agency noted.
Grantham noted that if mortgage interest costs were excluded from overall inflation, the rate would have come in at 1.2 per cent year over year.
Consumers paid 2.4 per cent more for groceries in August, the result of what economists call a base-year effect — the impact of comparing prices in a given month to the same month a year earlier.
Meanwhile, the price of clothing and footwear declined, atypical during a back-to-school shopping month, and electricity prices grew at a slower pace.
The Bank of Canada will hold its next interest rate meeting on Oct. 23. Some economists say the question isn’t whether the central bank will cut, but whether the cut will be 25 basis points or 50.