Inflation in Canada slowed to 5.9 percent

by SuperiorInvest February 21, 2023

February 21, 2023

OTTAWA — Canada’s annual inflation rate slowed to 5.9 percent in January, even as food prices rose at an even faster pace last month.

In its consumer price index report released Tuesday, Statistics Canada said the slowdown in headline inflation from 6.3 per cent in December reflected a base year effect.

The base year effect refers to the impact of price movements a year ago on the calculation of the year-on-year inflation rate.

With the big acceleration in price growth occurring in the first half of 2022, when the threat of a Russian invasion of Ukraine became a reality, the federal agency said the annual rate of inflation would continue to slow in the coming months.

The last time Canada’s annual inflation rate was below six percent was in February 2022, when it was 5.7 percent.

The overall rate was lower in January than many commercial banks expected in their forecasts, signaling good news for the Bank of Canada.

Last month, the Bank of Canada raised its key interest rate for the eighth straight time since March 2022, taking it from near zero to 4.5 per cent. That’s the most since 2007, when the central bank said it would take a “conditional” break to assess the effects of higher interest rates on the economy.

But Canadians saw no slowdown in food prices last month as prices rose faster year-over-year.
Food prices rose 11.4 percent from a year earlier, an acceleration from 11 percent in December. The federal agency said prices for meat, baked goods and vegetables rose faster.

Month-on-month higher gasoline prices in January pushed the overall price level higher compared to December. The federal agency said the consumer price index rose 0.5 percent in January after falling 0.6 percent a month earlier.
Meanwhile, consumers paid less for mobile services in January than a year ago as Boxing Day deals stretched into last month.

Passenger vehicle prices also slowed year-on-year, partly reflecting base-year effects as vehicle availability was affected by supply chain issues a year ago.