Canada Inflation Rate: What is Going on Presently?

Recently, the Canada inflation rate, as specified by Economists, have been anticipated to be at its lowest level since the reports that have come out on March 2021. This Canada Inflation Rate came ahead of Statistics Canada’s consumer price index which was set to be released on Tuesday. This is when a considerable number of Economists polled by Reuters are expecting the Canada inflation rate report to show prices rose 2.1 percent from a year ago, and down from a 2.5 percent annual gain in July. The forecasters also went forth to anticipate that the inflation remained flat on a month-over-month basis.

What are the Officials Saying About It?

The Canada inflation rate has taken a huge turn and now it is expected to ease to 2.1%. This is however, the lowest level that has ever been recorded at March 2021. Thus, according to this situation, this is what certain officials said.

“Unless there’s something lurking out there that we’re not aware of, it looks like we’re headed for a pretty favourable reading,” said BMO chief economist Douglas Porter.

Apart from that, RBC economists Nathan Janzen and Claire Fan also stated in a report last week that those expectations would put forward the headline Canada inflation rate just an inch over the Bank of Canada’s planned two percent Canada inflation rate target.

“Most of that August slowing is expected from a pullback in gasoline prices, but the (Bank of Canada’s) preferred core CPI measures are also expected to trend lower, with the closely-watched three-month annualized growth rate easing from an average of 2.6 percent in July,” the RBC economists said.

Canada Inflation Rate: What’s More?

The Canada inflation rate is currently coming at a continued progress on slowing inflation. This is because of the fact that it comes forward as the Central Bank has effectively signalled a willingness to speed up the cuts. This will be done with regard to its key lending rate if circumstances warrant.

Apart from that, the Bank of Canada has also reduced its key lending rate. This has been done by a quarter-percentage point earlier this month. This is recorded to be the third consecutive cut which was around 4.25 percent. Also, the governor Tiff Macklem said that the decision was motivated by a falling inflation. The official also went forth into noting that if the CPI is moving forward and it indicated that,

“was significantly weaker than we expected … it could be appropriate to take a bigger step, something bigger than 25 basis points.”

However, Macklem said that if the inflation is stronger than what is expected, then the bank could slow the pace of rate cuts. The Canada inflation rate has remained below three percent since January. This has made the fear of the price growth reaccelerating diminished as the economy has effectively weakened. Porter said despite progress on the Canada inflation rate, it’s still

“not in a place where it’s a compelling argument that the bank has to go even faster.”

He has also gone forward to forecast that the central bank will cut its key lending rate by a quarter-percentage point at every meeting. This will be done until July 2025, thus bringing it down to 2.5 percent by that time. In this regard, the prediction also comes. This is after data was released last week which showed Canada’s unemployment rate. The data rose to 6.6 percent in August from 6.4 percent in July.

More on the Canada Inflation Rate

However, regarding the Canada inflation rate, Porter said that the bank could speed up. This will be seen on its rate-cutting cycle if inflation continues easing.

“If we’re going to be wrong, it’s that we’re going to get to 2.5 percent even more quickly and possibly lower than that,” said Porter.

“There is a case to be made that if the economy were to weaken further. Then, there’s little reason for the bank to keep rates in what they consider to be the neutral zone. They could go below that.”

On top of that, shelter costs have remained the main driver of inflation. This is because Canadians face high rents and mortgage payments. Porter also noted that when factoring out housing costs, inflation in Canada and the U.S. hovers slightly above one percent.

“It looks as if rents are starting to moderate. They’re not necessarily falling, but they’re not rising as quickly. And of course, with interest rates coming down, ultimately the big kahuna here, mortgage interest costs, will recede as well.”

Plus, the U.S. Federal Reserve is set to meet on Wednesday. In this regard, Janzen and Fan said they expect the American Central to announce its first rate cut in four years.

“Gradual but persistent labor market softening and slowing inflation make it clear that current high interest rates are no longer needed,” they wrote.