Canada’s annual inflation rate slowed to 5.9 per cent in January – the lowest it has been in 11 months.
“Inflation is moving in the correct direction and is declining from its high numbers of 8.1 in June,” Christos Shiamptanis a Wifred Laurier economics professor said.
In January, the headline rate was lower than many commercial banks expected, signaling good news for the Bank of Canada.
William Scarth, a McMaster University economics professor, said it is good to see the January inflation rate come down, but added “it is still noticeably above the Bank’s target range of 1-3 per cent.”
Although there have been improvements in inflation rates there has been no slowdown in the cost of groceries last month as prices rose faster than expected.
“The food sector is the key contributor to inflation which is a sector that depends on energy,” Shiamptanis said. “The energy costs of transporting and producing products gets transported to the consumer.”
Prices for groceries increased by 11.4 per cent from a year ago, up from 11 per cent in December. Prices for meat, bakery goods, and vegetables were all higher than expected, according to the federal agency.
“I anticipate a lot of individuals will struggle because of this which is one of the biggest negative implications of inflation,” Shiamptanis said.
The Bank of Canada also hiked interest rates in January for the eighth consecutive month.
Right now, the rate sits at 4.5 percent, and experts say it could still go higher.
“We can expect the Bank of Canada will continue to hike interest rates, maybe at a slower pace, in hopes of bringing inflation closer to the target.” Amy Chen, an economics professor at Toronto Metropolitan University said.
“This will lead to even higher mortgage payments and increase in shelter costs for the average Canadian household,” she added.