MNI: Canada Inflation Slows Most In Almost Three Years to 5.2%

Canada's inflation rate slowed the most in almost three years in February to 5.2% from 5.9%, comforting central bankers who had said they hiked interest rates enough to bring price gains back to target even before the recent collapse of Silicon Valley Bank and Credit Suisse.

The Consumer Price Index slowed more than an economist consensus of 5.4% in Statistics Canada's report Tuesday from Ottawa. Prices rose 0.4% on a monthly basis, also less than the 0.5% forecast. 

Gasoline prices led the slowdown, falling 1% on the month and 4.7% from a year earlier, the first 12-month decline since January 2021. Inflation remains well above the Bank of Canada's 2% goal as it has for three years now, and the central bank says CPI will fade to 3% by mid-year and return to target in 2024. 

Governor Tiff Macklem on March 8 held the key lending at 4.5% following eight prior increases, and said he's likely finished unless inflation is unexpectedly stubborn. Recent financial turmoil has revived some market bets on a potential rate cut this year, though markets have swung back and forth several times now.

This is the last inflation report before the Bank’s April 12 rate decision. Statistics Canada also reported that core measures preferred by the Bank also slowed. The trim index faded to 4.8% from 5.1% and the median index by a notch to 4.9%. 

That won't impress consumers who are critical to inflation expectations with food price gains topping 10% for a seventh straight month. Mortgage interest costs also jumped 24%, the biggest gain since 1982. 

Much of February's overall price slowdown comes from unwinding the "base effect" as last year's big increases linked to the start of Russia's invasion of Ukraine falling out of the 12-month calculation. Some ex-officials have told MNI it will be harder to squeeze out the last bits of above-target inflation later on. 

Still, this is the fourth straight month where prices have slowed, putting Canada further away from the four-decade high of 8.1% inflation reached last June. Finance Minister Chrystia Freeland says her budget next week will be restrained to avoid making the Bank's inflation fight harder, though there will be money for low-income families and to match U.S. green technology subsidies.