Canada’s inflation rate has risen at its slowest pace in over three and a half years.
The country’s annual inflation rate fell to 1.6% in September, marking the lowest increase in the Consumer Price Index since Feb. 2021, according to data released by Statistics Canada on Tuesday.
The decrease comes after the country reached the Bank of Canada’s 2% inflation target in Aug., raising hopes for further interest rate cuts later this month. The Bank of Canada has already cut rates three times this year.
Lower inflation means that prices are still rising, just at a lesser rate.
The decline was largely driven by a sharp decrease in gasoline prices, which plummeted by 10.7% compared to September last year, a notable further decline from August’s 5.1% decrease.
Excluding gasoline, the all-items inflation rate remained steady at 2.2%, unchanged from the previous month.
The report highlighted that though price increases have slowed, they have risen 12.7% since Sept. 2021.
“Canadians continue to feel the impact of higher price levels for day-to-day basics such as rent (+21.0%) and food purchased from stores (+20.7%), which increased during that same 3-year period,” reads the report.
The cost of some goods fell, like clothing and footwear, which saw a 4.4% price decrease, and transportation, which saw a 1.5% price decrease. This suggests that the inflationary decrease is not due to government policies but because consumers are purchasing fewer household furnishings, clothing, and are travelling less.
Rent prices rose by 8.2% compared to last Sept., down slightly from an 8.9% increase in Aug.
Meanwhile, food prices continue to rise faster than overall inflation, with grocery prices increasing by 2.4% in September, matching the rate in August.
Provinces saw differing inflation changes, with Saskatchewan and Newfoundland and Labrador tied with the lowest inflation, at 0.7%. The province which saw inflation rise the most was British Columbia at 2%, flanked by Alberta at 1.9%. Every province’s inflation was at or below the Bank of Canada’s 2% target.
“Year over year, prices rose at a slower pace in September compared with August in all provinces,” reads the report.
The report also highlighted that tuition prices rose more slowly, 1.8% in 2024 compared to 2.5% in 2023. Alberta saw an increase of 2.3%, compared to 4.8%, a drastic decrease attributed to the province’s cap on domestic tuition fee increases.
The Bank of Canada will make its next decision regarding rate cuts on Oct. 23, with many economists predicting a 50 basis points rate cut following the inflationary decrease.
“If inflation continues to ease broadly in line with our July forecast, it is reasonable to expect further cuts in our policy rate,” said Bank of Canada’s governor Tiff Macklem in his Sept. update.
The Consumer Price Index data for October will be released on Nov. 19.
