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Inflation continues its pullback in Canada, with prices rising 5.2 per cent in February - YAHOO FINANCE
Canada's inflation rate eased to 5.2 per cent in February, Statistics Canada said on Tuesday, marking the largest deceleration since April 2020.
February's rise in the Consumer Price Index (CPI) marks a pullback from January's annual increase of 5.9 per cent, and a continued decline from the peak of 8.1 per cent in June of last year. On a monthly basis, Statistics Canada said inflation increased 0.4 per cent last month, or a seasonally adjusted 0.1 per cent.
The deceleration is more than economists had predicted. Economists surveyed by Bloomberg had expected inflation to ease to 5.4 per cent on an annualized basis in February.
Statistics Canada noted that the year-over-year deceleration was due to a "base-year effect", as the Canadians saw significant price increases in February 2022, when the global economy was significantly affected by Russia's invasion of Ukraine.
"While inflation has slowed in recent months, prices remain elevated," Statistics Canada said in its release.
Food prices remained high in February, with the cost of groceries rising 10.6 per cent, the seventh consecutive month of double-digit increases. Statistics Canada said the upward pressure on food prices is due to "supply constraints amid unfavourable weather in growing regions, as well as higher input costs such as animal feed, energy and packing material." Price growth did slow slightly for some grocery items. Meat products were up 6.2 per cent (versus 7.3 per cent in January), fresh vegetables were up 13.4 per cent (after 14.7 per cent in January), and bakery products rose 13.9 per cent (compared to a 15.5 per cent rise in January.)
Price growth slowed in four of the eight major CPI components from the previous month, including food, shelter, transportation and recreation.
Energy prices fell 0.6 per cent year-over-year, with gas prices falling 4.7 per cent, the first annual decline since January 2021.
Shelter costs also fell in February, but mortgage interest rate costs continued to increase amid higher interest rates.
What this means for the Bank of Canada
The inflation increase comes as the Bank of Canada holds its benchmark interest rate steady at 4.5 per cent, as it assesses the affects of its aggressive tightening cycle. Earlier this month the Bank of Canada become the first major central bank to pause interest rate hikes, following eight consecutive rate hikes made in an effort to tame soaring inflation.
While inflation is still well above the Bank's 2 per cent target, February's inflation data should keep the central bank on the sidelines when it comes to rate hikes, economists say.
"There's really no underlying reason for the Bank to hike further, especially with the Canadian dollar finding a footing," BMO Capital Markets chief economist Douglas Porter wrote in a note on Tuesday, adding that "there is still plenty of wood to chop in order to get inflation comfortably back into the target zone."
"Overall, the Bank's pause looks prudent, and we expect them to stay at current levels for quite some time, barring a major flare-up in the banking turmoil."
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
