Annual Inflation Dips Below 2 Percent Benchmark in September

Signage marks the Statistics Canada offices in Ottawa on July 21, 2010. The Canadian Press/Sean Kilpatrick

The annual inflation rate slowed sharply in September, dropping below the Bank of Canada’s 2 percent target, thanks to motorists paying less at the pump than they did last year, Statistics Canada says.

The annual inflation rate decreased to 1.6 percent last month from 2 percent in August, largely due to an ongoing decrease in gasoline prices, the agency said in its monthly consumer price index (CPI) report.

It was the slowest annual pace for inflation since February 2021 when it came in at 1.1 percent.

There was a 10.7 percent dip in September’s fuel prices compared to the same month last year. The annual inflation rate was measured at 2.2 percent in September when fuel was excluded.

September brought a 7.1 percent monthly decline in gasoline prices, which came after a 2.6 percent decrease in the previous month of August, StatCan said.

“The September decline was driven by lower crude oil prices amid increasing concerns over weaker economic growth, as well as lower costs associated with switching to winter blends,” the agency said, adding that the year-over-year decline put “downward pressure on the all-items CPI.”

Cost of Living

Rental prices experienced a deceleration in growth in September but remained high overall, rising 8.2 percent compared to the same period last year following an annual rise of 8.9 percent in August, StatCan said.

Rental price growth experienced the greatest slowdown in Newfoundland and Labrador, British Columbia, and New Brunswick at 5.1 percent, 7.3 percent, and 10.1 percent respectively.

Food prices also remained high. The cost of food purchased from stores rose more rapidly than the general inflation rate, increasing 2.4 percent in September, mirroring the rate observed in August, according to the report.

“This is the second consecutive month that grocery prices increased at a faster pace than headline inflation,” the agency said.

Prices for fresh or frozen beef surged 9.2 percent, while edible fats and oils increased 7.8 percent and eggs rose five percent.

There was a 3.5 percent increase in the price of food purchased from restaurants, compared to a 3.4 percent increase recorded in August.

Inflation and Interest

The inflation report serves as the last crucial economic indicator before the Bank of Canada makes its interest rate decision on Oct. 23.

The central bank has lowered its key interest rate three times this year, bringing it to the current 4.25 percent. The bank has a 2 percent inflation target.

Bank of Canada Governor Tiff Macklem has said Canadians can likely expect more interest rate reductions based on the progress that has been made in tackling inflation.

“With the continued progress we’ve seen on inflation, it is reasonable to expect further cuts in our policy rate,” he said during a Sept. 24 speech in Toronto. “The timing and pace will be determined by incoming data and our assessment of what those data mean for future inflation.”