Inflation Rate in Canada Drops, as Food Price Growth Slows

2 mins read

Canada’s consumer price index cooled to 2.7% in April, down from 2.9% in March, according to Statistics Canada. This decline was primarily driven by a slower pace of food price growth.

Food prices increased by 1.4% in April, compared to 1.9% in March. The cost of meat significantly contributed to this slowdown, alongside other food items like non-alcoholic beverages, bakery and cereal products, fruits and nuts, and fish and seafood.

However, consumers faced higher costs for gasoline, which rose by 6.1% in April following a 4.5% increase in March. The uptick in gas prices was attributed to the switch to summer petrol blends, supply concerns, and higher federal carbon levies.

April’s figures marked the lowest inflation rate since March 2021, which stood at 2.2%. In Alberta, despite a year-over-year slowdown in inflation, rent costs surged by 16.2% in April, outpacing the national average of 8.2% for the eighth consecutive month due to strong migration from other parts of Canada.

The Bank of Canada’s preferred measures of core inflation also eased, signaling a positive trend for the central bank. This development is crucial as the bank prepares for its next interest rate decision on June 5. Many economists anticipate that the Bank of Canada might start cutting rates during this meeting.

CIBC senior economist Andrew Grantham noted, “Today’s data should have provided all the all clear on the inflation front that the Bank of Canada needed to start cutting interest rates in June.”

Bank of Montreal chief economist Douglas Porter mentioned that while the possibility of a June rate cut remains, it will be a close decision influenced by the U.S. Federal Reserve’s actions. “When the Bank [of Canada] does eventually move, it will be gradual, with a highly patient Fed acting as a limiter on how far and how fast Canadian rates can fall,” Porter wrote.

This easing of inflation comes after four consecutive months of data indicating a decline in underlying inflation, providing some relief for consumers and small businesses alike.