For the first time in three years, Canada’s inflation rate is at the central bank’s official 2% target.
Statistics Canada reported that Canada’s inflation rate in August of this year came in at an annualized 2%, down from 2.5% in July and the lowest level since February 2021.
Economists surveyed by Bloomberg News had expected inflation to come in at an annualized rate of 2.1% in August.
The latest inflation reading is a victory for the Bank of Canada, which has used high interest rates to dampen the rise in consumer prices over the past two years.
Canada’s central bank targets inflation at a 2% annualized rate.
However, inflation across the country peaked at 8.1% in June 2022, prompting the Bank of Canada to aggressively raise interest rates.
Since June of this year, the central bank has begun loosening its monetary policy and made three consecutive interest rate cuts of 25-basis points each as evidence points to both easing price pressures and slowing economic growth.
Some economists say they expect the Bank of Canada to accelerate its interest rate cuts in coming months with inflation appearing to now be tamed.
Central banks around the world have been trying to orchestrate what economists call a “soft landing,” which is when inflation is brought under control with high interest rates without causing an economic recession.
The Bank of Canada’s next decision on interest rates is scheduled for Oct. 23.
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