Inflation rate slows more than expected, falling within the Bank of Canada's target range
Canada’s inflation rate slowed to 2.9 per cent in January, marking the first time since June that it has fallen within the Bank of Canada‘s target range of one to three per cent.
The deceleration, from a rate of 3.4 per cent in December, was sharper than the 3.3 per cent reading expected by economists and the 3.2 per cent mark forecast by the central bank itself.
Statistics Canada said the decline in the pace of inflation was mostly because of a year-over-year decline in gasoline prices.
Excluding gasoline, the consumer price index grew by only 3.2 per cent in January, down from 3.5 per cent in December, it said.
“There is a lot to like in today’s inflation release,” said Randall Bartlett, senior director of Canadian Economics at Desjardins.
Among the positive signs was an easing in food inflation, with food prices growing just 0.1 per cent from December, the weakest month-over-month increase since March 2021.
While still elevated, the year-over-year increase in grocery prices fell to 3.4 per cent in January compared with 4.7 per cent in December, putting downward pressure on the all-items CPI.
“The effect of past rate hikes feed into consumer prices persistently with a lag,” Royal Bank of Canada economist Abbey Xu said.
Olivia Cross, North America economist at Capital Economics, said the Bank of Canada will be pleased with January’s inflation report, and not just because the headline rate slowed more than expected.
The central bank’s core measures of inflation, which strip out volatility in prices, also fell in January. CPI-trim and CPI-median clocked in below expectations at 3.4 per cent and 3.3 per cent year-over-year growth, respectively.
CIBC economist Andrew Grantham noted that discretionary spending was slipping
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