The annual rate of inflation in Canada dropped to 5.9% in January, a higher decrease than expected, as price growth continued to slow down. The latest report from Statistics Canada revealed that prices were up by 4.9% without factoring in the cost of food and gasoline, while mortgage interest costs saw a significant increase of 21.2% on an annual basis and food prices rose by 10.4% year over year.

Despite this decrease in inflation being better than anticipated, it remains to be seen whether it will convince the Bank of Canada to hold off on further interest rate hikes. The central bank had previously indicated that it was prepared to hit pause on rate hikes if economic indicators played out as expected. The Bank of Canada is set to make an announcement on March 8th, and the inflation report may influence their decision.

The Canadian labour market added 150,000 jobs in January, which was seen as a blowout report. However, the fact that inflation has decreased once again could be a sign that rate hikes are working to cool the national economy.

The Bank of Canada has already projected that inflation will reach 3% by mid-2023 and return to its target rate of 2% by 2024. Inflation has been on a downward trend since it reached a record high of 8.1% in June 2022, caused by the Russia-Ukraine conflict and supply chain disruptions.

Overall, the latest inflation report is a positive sign for the Canadian economy, and it will be interesting to see how the Bank of Canada responds in their upcoming announcement, march 8th 2023.  

Don’t miss out on the BoC’s upcoming decision! Click here on March 8th at 7:25 AM to stay informed.