Canada's inflation rate falls to 2.8%
Inflation in Canada has reached its lowest levels in more than 2 years.
Canada's inflation rate fell to 2.8% in June, the lowest in more than two years. Recall that the Bank of Canada assumed that inflation will remain at the 3% level for the near future. In May, the inflation rate was 3.4%.
Finance Minister Chrystia Freeland called it a "significant moment."
"That is a significant moment. It should provide a lot of relief to Canadians. And I really want to thank Canadians, it has been a really tough time economically since COVID first hit, since we had a recession, followed by all the strains of reopening. And this is really a good moment."
According to Statistics Canada (StatCan), the main reason for the decline in inflation was a sharp drop in gasoline prices compared to the same period last year. As a result, the official inflation rate in the country fell to its lowest level since March 2021.
During June 2023, gasoline prices were 21% lower than they were in June 2022. Also, the cost of telecommunication services fell by 14.7% compared to a year ago.
On the other hand, rising food prices and mortgage costs have been the main factors contributing to inflation. The cost of food continues to rise at a rate of over 9%. It has risen 20% in the last 2 years, the highest rate of increase for food prices in the last 40 years. Economists, however, are optimistic. For example, Claire Fan, an economist at the Royal Bank of Canada, expressed hope in an interview with CBC News that prices will come down because most of the global factors causing their growth are weakening.
To top it all off, mortgage interest payments are getting more expensive. Over the past year, they have risen by more than 30%. The rise in mortgage rates was a direct result of the Bank of Canada's actions to contain inflation. StatCan reports that rental housing costs have risen 5.8% over the past year, the second largest contributor to inflation over the past year, after mortgage costs.
While the return of core inflation to the 1% to 3% range that the Bank of Canada is aiming for is encouraging, there is reason to believe that further declines will be more difficult to achieve.
