Canadian inflation fell to seven percent in August, Statistics Canada said Tuesday.
Economists had expected interest rates to come in at 7.3 percent, after inflation rose to a 40-year high of 8.1 percent earlier this summer.
Instead, the rate actually slowed more than expected, largely because gasoline became much cheaper over the month.
Gas prices fell by 9.6 percent in August compared to the previous month. That’s the biggest single-month drop in gasoline prices since April 2020, when the pandemic just started.
While gasoline got a little cheaper, food prices continued to rise — grocery costs have risen 10.8 percent in the past year.
That’s the fastest increase in the typical grocery bill since 1981.
“Food supply continued to be impacted by multiple factors, including extreme weather, higher input costs, the Russian invasion of Ukraine and supply chain disruptions,” the data agency said.
Bakery products have increased by more than 15 percent in the past year, while fruit has increased by more than 13 percent.
While grocery bills show no signs of shrinking, other price increases are beginning to slow, with the cost of lodging rising 6.6 percent in the past year.
On a monthly basis, inflation fell by 0.3 percent. That’s the biggest monthly cooldown since 2020. And so-called core inflation — which excludes volatile items like food and energy — fell to 5.2 percent, from 5.4 percent the month before.
“The easing of core inflation is a strong signal that the Bank of Canada’s rate hikes are having an effect,” said Tu Nguyen, an economist at consultancy RSM Canada.
But even at seven percent, official inflation is still more than twice what the central bank would like. That means consumers and borrowers can expect even more interest rate hikes.
Groceries prices are still rising rapidly and rapid wage growth keeps inflationary pressures in place [so] it’s not time to breathe a sigh of relief yet,” Nguyen said.