Canada's inflation cools to 2.9% in January, lowest in months

Canada's inflation cools:  Canada's annual inflation rate dropped more than expected to 2.9 per cent in January, mainly due to lower gas prices, with core inflation measures hitting their lowest levels in over 2 years, official data revealed on Tuesday.

Economists surveyed had predicted inflation to ease to 3.3 per cent from 3.4 per cent in December. The 2.9 per cent figure brings the headline inflation rate back within the Bank of Canada's target range of 1 per cent to 3 per cent for the first time since June 2023.

Month-on-month, the consumer price index remained unchanged, contrary to expectations of a 0.4 per cent increase.

Two of the Bank of Canada's (BoC) core inflation measures also declined. The CPI-median slowed to 3.3 per cent, its lowest since November 2021, while the CPI-trim fell to 3.4 per cent, the lowest since July 2021.

Single data points 

Although the BoC has stressed that single data points don't dictate its policy decisions, the cooling inflation could prompt discussions about a potential rate cut.

The BoC had previously forecasted headline inflation to hover around 3 per cent in the first half of 2024 before easing to 2.5 per cent by year-end.

Despite concerns about persistent underlying inflation, the central bank indicated a shift in focus towards potential rate cuts rather than further hikes.

Statistics Canada attributed the slowdown in headline inflation to declining gasoline prices, which fell 4 per cent annually. Additionally, store-bought. 

(with Reuters inputs)