Canada’s annual inflation rate fell to 2.5 percent in July, down from 2.7 percent in June, according to data released by Statistics Canada on Tuesday.
This marks the slowest pace of inflation growth in more than three years, dating back to March 2021.
The slowdown was partially driven by lower travel prices compared to a year ago, when the lifting of COVID-19 restrictions caused a surge in the cost of travel tours, airline tickets, and accommodations.
Additionally, prices for passenger vehicles and electricity also saw year-over-year declines.
However, the cost of groceries increased by 2.1 percent, while shelter costs rose by 5.7 percent.
Rent costs jumped 8.5 percent year over year, and mortgage interest costs surged by 21 percent, reflecting the impact of interest rate hikes that began in early 2022.
Overall, price pressures in Canada have been steadily easing this year, keeping the annual inflation rate below three percent since January. Encouraged by this progress, the Bank of Canada has reduced its key interest rate at its last two meetings. Governor Tiff Macklem has indicated that further rate cuts are possible, provided inflation continues to decline.
In the most recent interest rate decision, Macklem mentioned that the governing council opted to lower the policy rate partly to stimulate economic growth. The current key interest rate stands at 4.5 percent. TD Bank senior economist James Orlando noted that there is potential for the bank to reduce rates by an additional 25 basis points.
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