The inflation rate fell to 2% in August in the country, finally reaching the Bank of Canada’s target after a tumultuous fight against soaring prices.
According to Statistics Canada, inflation hit its lowest level since February 2021 last month. In July, the consumer price index had increased by 2.5%.
The slowdown in inflation observed in August is partly attributable to the drop in gasoline prices, which fell by 5.1%.
Meanwhile, clothing and footwear prices fell 0.6% month-over-month, marking their first decline since 1971. Retailers offered deeper discounts to attract consumers amid slowing demand.
Core measures of inflation, which are closely watched by the Bank of Canada and exclude price volatility, also edged lower in August.
The slowdown in price growth last month was sharper than the 2.1% annual increase forecasters had expected and will likely spark talk of a deeper interest rate cut next month.
The Bank of Canada began rapidly raising interest rates in March 2022 in response to soaring inflation, which peaked at 8.1% a few months later.
The central bank’s key rate reached 5% before being lowered three times since last June.
The combination of recovering global supply chains and high interest rates has helped slow price growth in Canada and elsewhere in the world.
Bank of Canada Governor Tiff Macklem recently signaled that the central bank is prepared to increase the depth of its interest rate cuts if inflation or the economy slows more than expected.
The key rate currently stands at 4.25%.
In the United States, the Federal Reserve is expected to make its first interest rate cut in four years on Wednesday.