Canadian inflation rate slows to 7.0%, though food prices hit 41-year high

By Julie Gordon

OTTAWA (Reuters) – Canada’s annual inflation rate eased more than expected in August and the index fell on a month-over-month basis for the first time this year, Statistics Canada data showed on Tuesday, even as food prices rose at their fastest pace in 41 years.

The country’s annual inflation rate slowed to 7.0% in August, below analyst forecasts of 7.3% and down from 7.6% in July. The deceleration was largely due to lower gasoline prices and slower gains in the shelter index, Statscan said.

On the month, the consumer price index fell 0.3%, the largest decline since early in the COVID-19 pandemic.

All three core measures of inflation, which taken together are seen as a better indicator of underlying price pressures, also eased slightly, with the average edging down to 5.2% from an upwardly revised 5.4% in July.

While inflation appears to be easing off peak levels, it remains far above the Bank of Canada’s 2% target.

The central bank hiked its policy rate by 75 basis points to 3.25% this month and left the door open to another oversized increase, saying it continues to see front-loading as the best way to battle fast-rising prices.

Money markets are betting on a 50-basis point hike in late October followed by a smaller 25-basis point move in December to lift interest rates to 4.0%, the highest since early 2008.

The Canadian dollar was trading 0.4% lower at 1.33 per U.S. dollar, or 75.19 U.S. cents.

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