(Ottawa) Inflation continued its downward trend last month in Canada, as the consumer price index increased 2.5% year over year, which is lower than the 2.7% increase observed in June and represents the largest increase low from March 2021.
Published at 8:46 am Updated at 9:12 am
According to Statistics Canada, the slowdown in overall inflation growth was widespread, but more significant price reductions were observed in the areas of package tours, motor vehicles and electricity.
While housing costs remain the main driver of inflation, price growth slowed last month to 5.7% year-on-year. In June, the annual increase was 6.2%.
Grocery prices, which at one point were jumping more than 10% year over year, are now rising at a much more moderate pace. In July, they increased by 2.1% compared to a year ago. Despite everything, there are still some price pressures, especially in the sectors that produce services.
Prices for services rose 4.4% from last year, a trend economists say reflects strong wage growth. In Quebec, inflation increased slightly last month, going from 2.2% in June to 2.3% in July.
However, in the context of a general slowdown in price growth nationally, analysts are increasingly expecting the Bank of Canada to continue reducing its key rate at its meetings.
Its governor, Tiff Macklem, admitted that the central bank is more concerned about the risk of keeping interest rates too high for too long.
During the latest interest rate announcement, Mr Macklem mentioned that the governing council had decided to lower the policy rate in part to help the economy get back on track. The central bank’s prime rate is now 4.5%. The central bank is due to provide its next policy rate update on 4 September.