TORONTO, Sept 17 (Askume) – Canada’s annual inflation rate fell to 2% in August, meeting the central bank’s target and the lowest level since February 2021, data showed on Tuesday.
Analysts polled by Askume had expected annual consumer price growth to slow to 2.1% from 2.5% in July.
Market Reaction:
Comment
Andrew Grantham, Senior Economist, CIBC Capital Markets
“The key point is that inflation is not a threat and the Bank of Canada should now focus on stimulating the economy and preventing unemployment from rising. We continue to anticipate a rate cut of about 200 basis points over the medium term between now and next year.”
Stephen Brown, Deputy Chief North America Economist, Capital Economics Department
“The return of headline inflation to the 2.0% target in August was mainly due to favourable base effects, and this situation is short-lived, with inflation rising back to 2.5% in the fourth quarter.”
“Still, the details released in August provide evidence that the war on inflation is about to be won and will fuel speculation that the central bank could soon cut interest rates by another 50 basis points.”
Andrew Kelvin, head of Canadian and global rates strategy, TD Securities
“Core inflation remains slightly stronger than the headline number suggests, meaning the 2% number may overstate progress on inflation.”
“Nevertheless, the fact that we are back on track with the Bank of Canada’s inflation target will be a huge boost for the Bank of Canada and will increase their confidence that their goal of controlling inflation has been achieved, which will allow them to focus more on growth and employment prospects.”
“It’s going to be very interesting because it will put the headlines on the growth numbers and the third quarter numbers are going to be very noisy because of the rail strike and things like that. I think the next few months are going to be very interesting in Canada.”
Derek Holt, Vice President Capital Markets Economics, Scotiabank
“The weighted mean and censored average accelerated again in August – at a seasonally adjusted annual rate, the weighted mean increased by 2.9% month-over-month and the censored average increased by 2.3%.”
“So July was a temporary period of weakness. I still think inflation risks remain. I don’t look at the year-on-year readings on some of the other key indicators. I think (the Bank of Canada) is focusing more on the lessons I mentioned.”
