July 20, 2023
Inflation has cooled back into the Bank of Canada’s target range, but economists are warning that might not be enough to stave off future interest rate hikes.
The annual rate of inflation cooled to 2.8 per cent last month, according to Statistics Canada, down from 3.4 per cent in May. That marks a substantial decline from the peak of inflation at 8.1 per cent in June of last year but core metrics remain “stickier,” economists note.
Core inflation refers to the change of the consumer price index excluding more volatile items such as the food and energy.
The federal agency said Tuesday that the slowdown in prices was “broad-based” but attributed most of the decline to a drop in gas prices compared to this time last year. Canadians continue to face high inflation at the grocery store, with prices rising 9.1 per cent annually in June.
The Bank of Canada’s target range for inflation is one-to-three per cent, but policymakers at the central bank have made it clear they will continue to keep pressure on prices until inflation returns back down to two per cent.
The central bank raised interest rates earlier this month, in part because of concerns that inflation would stay high for longer. It now expects Canada’s inflation rate to hover around three per cent for the next year, before steadily declining to the two per cent target by mid-2025.
