Canada sees a 2.9 per cent drop in its inflation rate

Feb 22, 2024 | Biz/Tech, News

Akshit Sehgal, 23, an accounting bookkeeper in Mississauga, has seen changes in gas prices from the past month which he feels turned out to be a relief on his finances.

“I feel necessities like gas are essential for daily travel. Lower fuel prices have helped to save a lot more money than before. Lower gas prices mean extra cash which is useful for other basic needs,” Sehgal said.

The Consumer Price Index (CPI) has decreased to 2.9 per cent in January 2024 from 3.4 per cent in December 2023. It’s the lowest level since it dropped to 2.8 per cent in June 2023

Gasoline prices fell by four per cent on a year-over-year basis. The drop is reflected in the recent Statistics Canada consumer price index report showing the inflation rate fell in January.

Low prices of gas in Manitoba were a major factor in the nationwide decline in gasoline prices.

Excluding gasoline, the CPI stood at 3.2 per cent in January, a drop from 3.5 per cent in December 2023.

The report said the rate of inflation has decreased in five out of eight items except for clothing and footwear, transportation, recreation, education and reading.

The report stated the prices for groceries are still increasing but at a rate much slower than in December.

According to the CPI report, airfare prices also decreased.

Monthly, there was a 23.7 per cent decrease in prices in January 2024 from December 2023.

“Airfares typically decline in January as heightened holiday demand subsides,” the report said.

Along with airfares, travel tours also showed a change of -8.1 per cent on a month-to-month basis contributing to a decrease in the inflation rate.

However, mortgage interest cost remains the major contributor to inflation by a change of 1.6 per cent from December 2023 and showed a change of 27.4 per cent on a year-over-year basis, the CPI report said.

Followed by mortgage interest costs are telephone services and rental prices which are the top three contributors to inflation, 4.9 per cent and 0.7 per cent respectively on a month-to-month basis.

The Bank of Canada, the country’s central bank that formulates its monetary policy, aims to keep the inflation rate at two per cent until 2026.

RBC published its economic report on Feb. 29, 2024, stating although the price hike continues to slow, the inflation rate still does not match up with the central bank’s target of two per cent.

The report stated the Bank of Canada might start lowering interest rates.

“As of now, our base case assumes the BoC starts to lower interest rates around mid-year,” the report said.