Sun Sep 15 10:00:46 UTC 2024: ## Canada’s Inflation Expected to Fall to Lowest Level Since March 2021
**OTTAWA** – Canada’s annual inflation rate is expected to fall to its lowest level since March 2021 in August, according to economists polled by Reuters. Statistics Canada is set to release the consumer price index on Tuesday, and economists anticipate a 2.1 per cent year-over-year increase, down from the 2.5 per cent gain seen in July.
The anticipated decline is attributed largely to a drop in gasoline prices. However, economists also expect core inflation measures, which exclude volatile items like food and energy, to trend lower.
This continued progress on slowing inflation comes as the Bank of Canada has signaled its willingness to speed up cuts to its key lending rate if circumstances warrant. Earlier this month, the bank reduced its key lending rate by a quarter-percentage point, marking the third consecutive cut, to 4.25 per cent.
Governor Tiff Macklem has stated that the bank could consider larger rate cuts if inflation continues to weaken significantly. Conversely, the bank could slow the pace of rate cuts if inflation proves stronger than expected.
While inflation has remained below three per cent since January, fears of a resurgence in price growth have subsided as the economy has weakened. Despite this progress, economists caution that inflation is not yet at a level that would necessitate a rapid acceleration of rate cuts.
BMO chief economist Douglas Porter predicts that the central bank will cut its key lending rate by a quarter-percentage point at every meeting until July 2025, bringing it down to 2.5 per cent by that time. However, Porter acknowledges that the bank could speed up its rate cutting cycle if inflation continues to ease.
Shelter costs remain a major driver of inflation, but signs suggest that this may be starting to moderate. With rents stabilizing and mortgage interest costs set to decline as interest rates fall, economists believe shelter costs will gradually ease their impact on overall inflation.
Meanwhile, the US Federal Reserve is expected to announce its first rate cut in four years at its meeting on Wednesday, citing gradual but persistent labor market softening and slowing inflation.
The continued progress on inflation provides a positive outlook for the Canadian economy. However, economists remain vigilant and will continue to monitor inflation trends closely to inform future economic policy decisions.
First Piper 