With inflation cooling in Canada, it is likely that policy makers will be less eager to hike rates.

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The Bank of Canada released its latest report today, announcing that the country’s inflation has cooled off in recent months. However, analysts say that the core inflation rate is still hot, and is likely to continue putting pressure on the central bank to raise interest rates.

Some economists predict that the bank could raise rates as early as next month, while others believe a more cautious approach is warranted. Whatever course the bank decides to take, it is clear that Canada’s economy remains strong and healthy.

Bloomberg Says

Canada’s inflation rate eased for a second month in August on lower gasoline prices, a welcome development that may give the Bank of Canada confidence its interest rate hikes are working.

The consumer price index rose 7% from a year ago, down from 7.6% in July and a four-decade high of 8.1% in June, Statistics Canada reported on Tuesday. Economists expected a reading of 7.3%. During the month of August, prices fell 0.3%, the largest monthly decline since the early months of the Covid-19 pandemic.

Summarizing

It was good news, a bad news day for the Bank of Canada. The good news was that inflation had cooled off in the past month, giving the bank more room to lower interest rates if it needed to. The bad news was that the core rate of inflation, which excludes volatile items like food and energy, remained stubbornly high. This meant that the bank would likely have to keep interest rates relatively high in order to combat rising prices.

Bank officials met behind closed doors to discuss their options. Some argued for a rate cut, while others maintained that it was still necessary to keep rates high in order to ward off inflation. In the end, they decided to hold steady for now and see how things played out over the next few months.

 

Vik Palan

Vik Palan

Chief Editor - Ratestead.ca

Ratestead.ca
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