Inflation Was Down Substantially in January

OTTAWA — Canada witnessed a notable downturn in its annual inflation rate, dropping to 2.9 percent last month, a more
pronounced deceleration than anticipated by analysts, according to Statistics Canada’s consumer price index report released on Tuesday, February 20.
The report highlighted that the primary contributor to this decline was the decrease in gasoline prices compared to the
previous year.
In December, the annual inflation rate stood at 3.4 percent, making the recent drop a significant development. Moreover,
the latest report brought a cascade of positive news for consumers, with price growth slowing in five out of eight components of the consumer price index, notably in the food sector.
Notably, grocery prices rose by 3.4 percent annually in January, a decrease from the 4.7 percent hike observed in December.
The data also bodes well for the Bank of Canada, with indications of underlying price pressures subsiding and the headline
rate retreating to the central bank’s target range of one to two percent. Additionally, the central bank’s core measures of
inflation, designed to remove price volatility, also saw a decline in January.
On a seasonally adjusted monthly basis, prices in January recorded a rare decrease, marking the first such occurrence
since May 2020.
This half-percentage-point decline in the headline inflation rate follows a period of price growth volatility, which injected
uncertainty into the timing of potential rate cuts.
While the Bank of Canada has maintained its key interest rate at five percent, recent signals suggest that a rate cut may
be on the horizon. However, the central bank has emphasized the need for more evidence indicating a sustained trajectory toward its two percent inflation target before implementing any policy changes