OTTAWA — Inflation finally hit the Bank of Canada's two per cent target in August after a tumultuous battle with skyrocketing price growth, raising the odds of larger interest rate cuts in the coming months.
OTTAWA — Inflation finally hit the Bank of Canada's two per cent target in August after a tumultuous battle with skyrocketing price growth, raising the odds of larger interest rate cuts in the coming months.
Clothing and footwear prices also decreased on a month-over-month basis. It marked the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand. The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday's figures"tilt the scales" slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement. "With inflation getting closer to the target, we need to increasingly guard against the risk that the economy is too weak and inflation falls too much," Macklem said after announcing a rate cut on Sept. 4.
Macklem has emphasized that the inflation target is symmetrical — meaning the Bank of Canada is just as concerned with inflation falling below target as it is with it rising above the benchmark.
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