Canada’s rate of inflation rose two per cent in August on a year-over-year basis, Statistics Canada said in its Sept. 17 Consumer Price Index report.
That’s the lowest pace of inflation reported since February 2021. It’s also far lower than July’s 2.5 per cent inflation rate.
“The deceleration in headline inflation in August was due, in part, to lower prices for gasoline, due to a combination of lower prices and a base-year effect,” StatCan said in the report.
Gasoline prices fell 5.1 per cent compared to August 2023. Excluding gasoline, the CPI rose 2.2 per cent in August.
Mortgage interest costs and rent costs were the largest contributors to the increase to the CPI in August, the report added.
The mortgage interest cost index rose 18.8 per cent year over year; however, that’s far lower than the 30.9 per cent year-over-year increase reported back in August 2023.
“Despite slowing price growth, mortgage interest cost has remained the largest contributor to the all-items increase since December 2022. Excluding mortgage interest cost, the CPI rose 1.2 per cent year over year in August 2024,” the StatCan report said.
“Today, the Bank of Canada’s long-awaited goal has been achieved, with inflation falling to its target of two per cent, along with significant decreases in the core measures. While the central bank’s cutting cycle is already well underway, today’s reading further strengthens the rationale for additional cuts in the months to come,” said Penelope Graham, mortgage expert at Ratehub.ca.
“Now that inflation has been subdued, the bank’s main focus will be on whether the economy is losing steam too quickly. While a quarter-point cut is most likely in their upcoming October announcement, the language used by the governing council at that time will indicate if monetary policy needs to be loosened at a quicker pace.”
The BoC increased overnight interest rates 10 times between March 2022 and July 2023 to a rate of five per cent in an effort to curb inflation and bring it down to its two per cent target. It has since lowered interest rates three times to the current overnight rate of 4.25 per cent.
