Canada’s Inflation Rate Slides to 2.8%, Meets Bank of Canada’s Target Range after Two Years
In a welcome development for the Canadian economy, the country’s inflation rate has taken a significant tumble to 2.8 per cent in June, finally landing within the Bank of Canada’s target range for the first time in more than two years. Statistics Canada’s latest consumer price index report, released on Tuesday, highlighted the deceleration, which was driven by various factors, including lower gasoline prices compared to the previous year.
However, the optimistic news is tempered by the ongoing challenge of surging grocery prices, which rose by 9.1 per cent year-over-year, showing only a slight acceleration compared to May’s figures. The previous month recorded an annual inflation rate of 3.4 per cent, and the last time it fell below the three per cent mark was in March 2021.
Acknowledging the persistently high inflation rates, the Bank of Canada made the decision to raise interest rates earlier this month. The central bank’s projection indicates that inflation is expected to linger around three per cent over the next year before gradually easing to two per cent by mid-2025. The bank has been resolute in its pursuit of maintaining a two per cent inflation target.
The motivation behind the rate hikes lies in the objective of curbing demand in the economy, making borrowing more expensive for both consumers and businesses. This tightening process is intended to alleviate inflationary pressures, albeit at the cost of higher interest rates for Canadian mortgage borrowers.
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