Canada’s annual inflation rate fell to 2.9 percent in January. Inflation has slowed more than forecasters expected during this period.
Statistics Canada’s consumer price report, released on February 20, said lower gasoline prices this year were the biggest contributor to the decline in inflation. The annual inflation rate was 3.4 percent in December.
The February 20 report provided some good news for consumers. Inflation in five of the eight components of the consumer price index declined during the period. Grocery prices rose at an annual rate of 3.4 percent in January. In December, it increased by 4.7 percent.
The report also had positive indications for the Bank of Canada as inflation became bearable and headline inflation remained within the central bank’s 2 percent range. The central bank’s core inflation also eased in January. Inflation in January on a monthly basis after seasonal adjustment fell for the first time since May 2020.
Headline inflation eased by half a percentage point after a volatile period of inflation. Volatility over inflation led to uncertainty over interest rate cuts.
Central policymakers have kept interest rates unchanged at 5 percent. They have hinted at cutting interest rates as the next step. But the Bank of Canada has made it clear that more evidence is needed that inflation is moving toward the 2 percent target.
