Canada’s inflation rate slowed in February, putting a potential Bank of Canada interest rate cut on the table for the summer.
The consumer price index rose 2.8 per cent on a year-over-year basis in February, down from 2.9 per cent in January, according to Statistics Canada data released on Monday.
Economists had expected inflation to accelerate by 3.1 per cent, which could have further blurred where the central bank’s overnight rate was heading. Instead, the easing provides an opening for the Bank of Canada to begin discussing rate cuts, economists said.
“We’re not the only analysts caught by surprise at how modest these inflation rates of the past two months have been,” Bank of Montreal chief economist Douglas Porter said.
With this latest data in hand, Stephen Brown, deputy chief North America economist at Capital Economics Ltd., said the forecast for a cut in June is arguably now looking more likely than the 70 per cent probability currently priced into markets.
The softening in price pressures was relatively broad-based, but was most notable in grocery store prices, which rose 2.4 per cent, marking the first time they rose at a slower pace than overall inflation since October 2021, and cellphone plan prices, which dropped 26.5 per cent from the year before, Statistics Canada said.
This was offset by a year-over-year increase in gasoline prices, which rose 0.8 per cent, following a four per cent decline in the prior month.
CPI core-trim and core-median, the measures the Bank of Canada is most focused on, decelerated to 3.2 per cent and 3.1 per cent, respectively, down from 3.4 per cent and 3.3 per cent in January.
Porter said the figures come as a surprise, especially in contrast to the higher and stickier readings in
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