Canada’s inflation rate fell to 7% in August from a year ago as gasoline prices across the
country moved lower.
August was the second consecutive month in which Canada’s inflation rate eased, an
encouraging sign that the Bank of Canada’s interest rate hikes are working as intended.
The 7% rise in August’s Consumer Price Index (CPI) was down from 7.6% in July and 8.1% in
June, according to Statistics Canada.
Economists polled by Refinitiv had expected an August inflation rate of 7.3%. On a monthly
basis, consumer prices fell 0.3%, the largest decline since the start of the pandemic in 2020.
Core inflation that excludes volatile food and energy prices fell to 5.23% in August from a
revised 5.43% in July, said StatsCan.
Prices for gasoline, durable goods, and shelter rose less in August on a year-over-year basis
than in July, but prices for food bought at stores continued to increase, rising 10.8% from a year
ago, its biggest gain since 1981.
Markets have fully priced in a 50-basis point interest rate hike by the Bank of Canada at its next
policy meeting in October, and a further 25-basis point increase in December of this year.
So far in 2022, the Bank of Canada has lifted its benchmark interest rate to 3.25% from a
historic low of 0.25% as it works to bring inflation down to its 2% target.
Interest rates in Canada are now at their highest level since 2008, and the highest among
developed nations.
The Canadian dollar fell two-tenths of a cent to trade at $1.3308 per U.S. dollar on news of the
latest inflation data.
