Canada’s annual inflation rate dropped to 2.5% in July, the slowest it’s been in over three years. This slowdown makes it likely that the Bank of Canada will cut interest rates again next month.
According to data from Statistics Canada, inflation has been decreasing for seven months in a row, hitting its lowest point since March 2021, which economists had expected.
From June to July, overall inflation went up slightly by 0.4%, but two key inflation measures that the Bank of Canada closely monitors averaged 2.55%. The biggest factor in the monthly decline was lower shelter costs, which dropped from 6.2% in June to 5.7% in July, although the cost of mortgage interest and rent still heavily affect the overall inflation rate.
Statistics Canada also reported that the cost of paying a mortgage jumped by 21% between July 2023 and July 2024, while rent prices across the country were up 8.5% compared to last year.
Even so, July’s numbers show that inflation is moving steadily towards the Bank of Canada’s target rate of 2%, after peaking at a 39-year high of 8.1% in mid-2022.
The Bank of Canada is expected to announce its next interest rate decision on September 4, and after cutting rates by 25 basis points in each of its last two decisions, another cut is anticipated.