Canada's Inflation Hits Central Bank's 2% Target, Fuels Expectations of 50-Basis-Point Interest Rate Cut in October
Canada's annual inflation rate has reached the central bank's 2% target in August, with consumer prices falling by 0.2% on a month-on-month basis. Analysts predict a 50-basis-point interest rate cut by the country's central bank next month to expedite the return to a more neutral setting.
The Bank of Canada's Governor Tiff Macklem has expressed concerns about the risk of inflation falling below target due to weak economic growth. The gradual rise in unemployment and slowing pace of economic growth suggest that high interest rates may be working too well to cool the economy.
The easing of price pressures in August was primarily driven by lower gasoline prices, telephone services, and clothing and footwear costs. However, shelter costs, including mortgage interest and rents, continued to rise at a tepid pace.
Overall, the Canadian dollar edged lower against the U.S. dollar, reflecting the potential impact of the upcoming interest rate cut on the currency exchange rates. With expectations of further rate cuts in the coming months, investors and consumers need to stay informed and adjust their financial strategies accordingly.