Canada’s annual inflation rate cooled to a 40-month low of 2.5% in July, marking the lowest level since 2021 and continuing a positive trend for the Canadian economy. This marks the seventh consecutive month that inflation has remained within the Bank of Canada’s target range, offering some relief to Canadians who have faced rising costs in recent years.
According to data released by Statistics Canada, the consumer price index (CPI) increased by 0.4% on a monthly basis, matching analysts’ forecasts. Core inflation measures also eased, reaching their slowest pace since April 2021. The CPI-median slowed to 2.4% from 2.6% in June, while the CPI-trim cooled to 2.7% from 2.8%.
The decrease in inflation is largely attributed to lower prices for travel tours, passenger vehicles, and electricity. Notably, travel tour prices fell by 2.8% in July after a 7.4% increase in June, and passenger vehicle prices declined at the fastest rate since November 2012. Despite the positive trend, services inflation remained elevated at 4.4%, though it has slowed from 4.8% in June.
The Bank of Canada, which has been closely monitoring inflation, is now on track to consider further interest rate cuts. Money markets are anticipating a 25 basis point cut at the central bank’s next rate announcement on September 4, with expectations of up to three more cuts before the end of the year. These cuts could bring the benchmark rate down to 3.75% by year-end.
Shafqat Ali, Member of Parliament for Brampton Centre, welcomed the news of the declining inflation rate, highlighting the positive impact it will have on Canadian households.
“This significant drop in inflation is a testament to our government’s effective economic strategies. By keeping inflation within the Bank of Canada’s target range, we are ensuring that families can better manage their household budgets and that businesses can plan for the future with greater confidence,” said Ali.
Maninder Singh, Member of Parliament for Milton, also commented on the importance of maintaining economic stability while addressing the needs of Canadians.
“The continued decline in inflation is encouraging, but it is essential that we remain vigilant in our efforts to support all Canadians. Our government is committed to ensuring that the benefits of a stable economy are felt by everyone, especially those who have been most affected by rising costs,” Singh stated.
Kamal Khera, Minister of Diversity, Inclusion, and Persons with Disabilities, emphasized the need for inclusive economic growth as Canada navigates its post-pandemic recovery.
“While we welcome the news of lower inflation, we must ensure that our economic policies are inclusive and equitable. Our focus remains on building a strong, resilient economy that works for everyone, including marginalized communities and those facing barriers to economic participation,” Khera said.
The Bank of Canada’s recent policy shifts, including its focus on stimulating economic growth alongside controlling inflation, have played a crucial role in the current economic landscape. With inflation now at its closest point to the Bank of Canada’s 2% target since March 2021, the central bank’s decisions in the coming months will be critical in shaping the future trajectory of Canada’s economy.
As Canadians adjust to these economic changes, the government continues to prioritize policies that support sustainable growth, protect the purchasing power of citizens, and promote financial stability across the nation.