Canadians received some slight financial relief over the summer as the country’s annual inflation rate went down to 2.5% last month, down slightly from 2.7% in June.
Inflation has increased at its slowest pace in over three years, noted Statistics Canada in its monthly Consumer Price Index report.
While certain areas saw relief, like the cost of electricity, travel tours, airline tickets, accommodation, and passenger vehicles, gas prices continued to increase in July.
“Year over year, gasoline prices rose at a faster pace in July (+1.9%) compared with June (+0.4%). Prices accelerated the most in the Prairie provinces, partially attributable to reduced supply amid a refinery shutdown in the Midwestern United States,” reads the report.
The cost of groceries also rose by 2.1% last month as well as shelter costs, which increased by 5.7%.
Additionally, rent costs jumped by 8.5% year over year and mortgage interest increased by 21%.
Prime Minister Justin Trudeau celebrated the news in a post to X, saying, “We’ve still got a lot more work to do to make sure Canadians feel that relief in their bank accounts. But inflation is cooling, and that’s welcome news.”
However, vice president of communications at the Montreal Economic Institute Renaud Brossard said it’s not the Trudeau government who should be taking credit for the reduction.
Instead, he credits the policies of Canada’s central bank with the positive change in direction.
“As much as the Trudeau government will want to take credit for the recent drop in inflation, it is rather due to the Bank of Canada’s tightening of our monetary policy,” Brossard told True North.
The central bank has been exercising its policy of quantitative tightening for the past several years, only recently cutting its key inflation rate earlier this summer for the first time since 2020.
The Bank of Canada cut the key rate by 0.25% points, reducing it to 4.75% in June before making another cut last month of 0.5%.
Its key interest rate now sits at 4.5% with the central bank slated to announce its next interest rate on Sept. 4 of this year.
Bank of Canada governor Tiff Macklem said the cuts were made possible due to overall inflation beginning to ease in recent months.
However, Brossard said that Canada’s record-high inflation could have been avoided altogether if the Trudeau government had been more fiscally responsible to begin with.
“The federal government could have helped by reducing its spending and bringing the budget back to balance, but instead chose to keep fanning the flames of inflation with yet another large deficit this year,” said Brossard.
“If it wasn’t for such prolonged government overspending, inflation wouldn’t have risen as high, and the interest rates needed to tame it would have been lower.”
