Canada’s inflationary pressure eases in February

• Statistics Canada reported that Canada’s inflation rate slowed more than expected in February to its lowest level in 13 months
• The annual inflation rate fell to 5.2 per cent in February, beating analysts’ forecast for a 5.4 per cent decline
• Compared to an overall inflation rate of 5.9 per cent in January, this is the biggest single-month decline in almost three years
• With slowing inflation, money markets are forecasting the central bank may keep rates unchanged at its next meeting on April 12

Statistics Canada reported that Canada’s inflation rate slowed more than expected in February to its lowest level in 13 months.

The annual inflation rate fell to 5.2 per cent in February, beating analysts’ forecast for a 5.4 per cent decline. Statistics Canada reported that compared to an overall inflation rate of 5.9 per cent in January, this is the biggest single-month decline in almost three years.

Excluding food and energy, prices were up 4.8 per cent on an annual basis in February. This is just slightly below 4.9-per-cent gain in January.

Food inflation, which includes groceries and food from restaurants, came in at 9.7 per cent, down from 10.4 per cent the month earlier.

Gasoline was a big contributor to slowing inflation with prices falling nearly 5 per cent in February from a year earlier. This is the first annual decline since the outset of 2021. Over all, energy prices fell 0.6 per cent. Electricity dropped by 2.3 per cent compared to the previous year.

The average of two of the Bank of Canada’s core measures of underlying inflation, CPI-median and CPI-trim, came in at 4.9 per cent, compared to 5.1 per cent in January.

The Bank of Canada left its key overnight interest target unchanged at 4.5 per cent earlier this month. It reiterated that it would keep interest rates on hold if inflation came down in line with its forecasts, reaching its 2 per cent target next year.

With slowing inflation, money markets are forecasting the central bank may keep rates unchanged at its next meeting on April 12.