Inflation expected to ease to 2.1%
Economists anticipate that Canada's annual inflation rate in August fell to its lowest level since March 2021.
Ahead of Statistics Canada's consumer price index set to be released on Tuesday, economists polled by Reuters are expecting the report to show prices rose 2.1% from a year ago, down from a
2.5% annual gain in July. The forecasters also anticipate inflation remained flat on a month-over-month basis.
“Unless there's something lurking out there that we're not aware of, it looks like we're headed for a pretty favourable reading,” BMO chief economist Douglas Porter said.
Foot's off gas
RBC economists Nathan Janzen and Claire Fan said in a report last week that those expectations would put the headline inflation rate just a hair over the Bank of Canada's 2% inflation target.
“Most of that August slowing is expected from a pullback in gasoline prices, but the (Bank of Canada's) preferred core CPI measures are also expected to trend lower, with the closely watched three-month annualized growth rate easing from an average of 2.6% in July,” the RBC economists said.
The continued progress on slowing inflation comes as the central bank has signalled a willingness to speed up cuts to its key lending rate.
The Bank of Canada reduced its key lending rate by a quarterpercentage point this month — the third consecutive cut — to 4.25%. Governor Tiff Macklem said the decision was motivated by falling inflation, noting if the CPI “was significantly weaker than we expected ... it could be appropriate to take a bigger step, something bigger than 25 basis points.”