Consumer price index in August hits 0.1%, Statistics Canada says
The Bank of Canada intends to keep its key policy interest rate at 0.25%
OTTAWA — Statistics Canada says the consumer price index in August was up 0.1% compared with a year ago.
The annual inflation rate was unchanged from the year-over-year increase of 0.1% in July.
The average economist estimate had been for a year-over-year increase of 0.4% for August, according to financial markets data firm Refinitiv.
Gasoline prices were down 11.1% compared with August 2019, following a 14.9% decline recorded in July.
Excluding gasoline from the inflation calculations, the consumer price index rose by 0.6% in August.
Prices were up in other categories such as personal care services like haircuts, which had a year-over-year increase of 7.2%.
The average of Canada’s three measures for core inflation, which are considered better gauges of underlying price pressures and closely tracked by the Bank of Canada, was 1.7%.
The Bank of Canada intends to keep its key policy interest rate at 0.25%, which is as low as it will go, until inflation is back at the central bank’s 2% target.
The hope is that by keeping its rate low, the central bank can drive down rates on mortgages and loans to make it easier for people to borrow and spend to aid the economy as it recuperates from the COVID-19 crisis.
Experts suggest the Bank of Canada’s key rate could stay where it is until late 2022 or even into 2023, although the pace of a recovery is largely dependent on the path of the pandemic, which has affected large swaths of the Canadian economy.
The monthly inflation report noted that air travel costs fell 16% compared with August 2019, following a decline of 8.6% in July as demand falls during the pandemic and airlines have offered discounts in response.
Regionally, prices rose the fastest in Prince Edward Island, where Statistics Canada says consumers paid more for cigarettes — which registered an annualized increase of 7.8% — after the province instated a special tax in mid-July.