On October 15, 2023, the Canadian Press reported that Statistics Canada revealed a significant drop in the Consumer Price Index (CPI) for September, which rose by just 1.6% year-over-year. This marks the lowest inflation rate the country has seen since February 2021.

In August, the CPI had increased by 2.0%, representing the first time in three and a half years that it fell back to the Bank of Canada’s inflation target level. According to Statistics Canada, the primary driver behind the continued decrease in overall inflation was a 10.7% year-over-year decline in gasoline prices. When gasoline prices are excluded, the CPI rose by 2.2% compared to the same month last year, unchanged from the previous month.

Month-over-month, the CPI fell by 0.4% in September, a slight increase from August’s decline of 0.2%. The agency noted that gasoline prices played a major role in both the year-over-year and month-over-month changes in inflation levels.

Despite the easing price increases, Statistics Canada pointed out that the price levels remain relatively high. Compared to September 2021, the CPI has surged by 12.7%, with both rental and retail food prices rising by over 20%.

In September, retail grocery prices increased by 2.4% year-over-year, matching the rise from the previous month. This marks the second consecutive month that grocery price increases have outpaced the overall inflation rate.

Additionally, Statistics Canada previously reported that Canada’s real Gross Domestic Product (GDP) grew by 0.2% in July, with expectations that the August GDP remained relatively stable.

Public opinion suggests that the latest inflation data has heightened market analysts’ expectations regarding further interest rate cuts by the Bank of Canada. Since March 2022, the Bank has implemented ten rate hikes to combat severe inflation. However, with the easing of high inflation rates, it has now lowered interest rates three times since June. The next meeting of the Bank of Canada is scheduled for October 23.