The Hamilton Spectator

Inflation slows while rates stay steady

Food prices still soaring but economist calls latest Canadian numbers ‘mildly encouragin­g’


Canada’s annual inflation rate continued to slow last month, reaffirmin­g the central bank’s decision to hold its key interest rate steady.

In its latest consumer price index report released Tuesday, Statistics Canada said the country’s inflation rate rose 5.2 per cent year over year in February, marking the largest decelerati­on since April 2020.

The reading compared with an annual inflation rate of 5.9 per cent in January and was the lowest rate since January 2022 when it was 5.1 per cent.

BMO’s chief economist Douglas Porter called the latest report “mildly encouragin­g.”

“That’s actually a couple months in a row now where we’ve had slightly better-than-expected inflation readings,” he said.

Since peaking at 8.1 per cent in the summer, Canada’s annual inflation rate has been tumbling amid easing global pressures and high interest rates.

The Bank of Canada is hoping inflation will continue to slow without the need for further interest rate hikes.

Earlier this month, the central bank left its key interest rate target unchanged at 4.5 per cent, marking the first hold since it began raising rates last year.

The Bank of Canada has been laser-focused on bringing inflation back down to its two per cent target. Its aggressive rate hike cycle over the last year is starting to slow the economy by forcing people and businesses to pull back on spending.

Porter said the Bank of Canada is likely “breathing a big sigh of relief” looking at the February inflation data.

“This very much supports their decision to stop raising interest rates,” Porter said.

In Tuesday’s report, Statistics Canada noted that the decline in February was due to a steep monthly increase in prices in February 2022 when the global economy was significan­tly affected by the Russian invasion of Ukraine.

Energy prices were down 0.6 per cent year over year as gasoline prices fell 4.7 per cent compared with a year ago when prices began to rise due to the Russian invasion of Ukraine.

Meanwhile, grocery prices continue to rise rapidly, even as overall inflation eases. Prices for food purchased from stores in February were up 10.6 per cent compared with a year ago, the seventh consecutiv­e month of double-digit increases. Excluding food and energy, Statistics Canada said prices in February were up 4.8 per cent compared with a year ago.

The federal government has signalled its upcoming budget, which is set to be tabled March 28, will include affordabil­ity measures to help Canadians still challenged by the cost of living.

Prices for food purchased from stores in February were up 10.6 per cent compared with a year ago

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