OTTAWA, July 19 (BNA): Canada’s annual inflation rate fell more-than-expected to a 27-month low of 2.8% in June, boosted by lower energy prices, data showed Tuesday, though increases in food and shelter costs persisted. Although interest rates have increased 10 times. in less than 18 months.
Analysts polled by Reuters had forecast inflation falling to 3.0 percent from 3.4 percent in May. Statistics Canada reported that the consumer price index rose 0.1% on a monthly basis, also below expectations of 0.3%.
The June reading, which benefited from a comparison with the four-decade-high inflation rate a year earlier, indicated that the annual rate was within the Bank of Canada’s control range of 1% to 3% for the first time since March 2021. The bank is targeting 2% inflation.
“Inflation is definitely moving in the right direction, but we’re seeing more consistent and sustained underlying action,” said Michael Greenberg, senior vice president and portfolio manager at Franklin Templeton Investment Solutions.
Excluding food and energy, prices rose 3.5% compared to a 4.0% increase in May. Grocery prices rose 9.1% year over year in June, a higher mark than the increase recorded in May.
Food prices from restaurants slowed slightly in June from May.
Shelter costs rose by a seasonally adjusted 0.5% in June from May.
The average of the Bank of Canada’s (BoC) two core measures of core inflation, the CPI average and the CPI downturn, came in at 3.8% compared to 3.9% in May.
“The BoC’s preferred measures of core inflation, which exclude large moves in individual categories, show that underlying price pressures remain flat,” said Royce Mendez, head of macro strategy at Desjardins Group.
The three-month annualized rate for the core medium measure remained at 3.6%, Mendez said, while the trimmed medium gauge accelerated to 4.0% from 3.9% in May.
Canadian Finance Minister Chrystia Freeland, speaking to reporters on a call from India where she attended the G-20 meeting, hailed the inflation report as a “milestone moment” and said Canada’s inflation is lower than any other G-7 country.
Freeland urged Canadian businesses – particularly food retailers – to “take responsibility for the time being and support Canadians and the Canadian economy with a responsible approach to their pricing.”
The Bank of Canada last week raised interest rates to a 22-year high of 5.0%, the 10th rate increase since March last year, and said it could raise them further if new data showed inflation slowing above its target.
The central bank said last week, noting the pickup in demand, that it expects inflation to remain at around 3% over the next year before falling to the bank’s target of 2% by mid-2025, six months later than previously expected.
“We still don’t get to 2%,” said Jules Boudreau, chief economist at McKinsey Investments. “So there is still some work to be done. But the policy is probably restrictive enough at the moment to do that.”
Money markets have cut bets on a rate hike at the next BoC meeting in December to a probability of 20% from 25% before the data.
The price of gasoline, which led the slowdown, fell 21.6% compared to June 2022 when China, the largest importer of crude oil, eased some of the COVID-19 public health restrictions that have contributed to a surge in global demand.
The Canadian dollar was trading down 0.2% at 1.3225 per dollar, or 75.61 US cents.
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