Inflation continued its downward trend last month in Canada, as the consumer price index rose 2.5% year-over-year, down from the 2.7% increase seen in June and the smallest increase since March 2021.
According to Statistics Canada, the slowdown in overall inflation growth was widespread, but more pronounced price declines were observed in the areas of package tours, motor vehicles and electricity.
Although housing costs remain the main driver of inflation, price growth slowed last month to 5.7% year-over-year. In June, the annual increase was 6.2%.
Grocery prices, which at one point were jumping more than 10% year-on-year, are now rising at a much more modest pace. In July, they were up 2.1% from a year ago.
Despite this, some price pressures persist, particularly in service-producing sectors.
Prices for services rose 4.4% from a year ago, a trend that economists say reflects strong wage growth.
In Quebec, inflation increased slightly last month, from 2.2% in June to 2.3% in July.
However, against a backdrop of a general slowdown in price growth nationally, analysts largely expect the Bank of Canada to continue to cut its key rate at its upcoming meetings.
Its governor, Tiff Macklem, acknowledged that the central bank is increasingly concerned about the risk of keeping interest rates too high for too long.
In the last interest rate announcement, Mr. Macklem mentioned that the Governing Council had decided to lower the policy rate in part to help the economy get back on track.
The central bank’s key rate is now 4.5%.
The central bank is due to provide its next update on the policy rate on September 4.