Inflation in Canada fell below two per cent year-on-year in September, the national statistics agency said, figures likely to fuel wider calls for an aggressive interest rate cut.
Statistics Canada said inflation had eased to 1.6 per cent, with lower gas prices a main contributor.
Fuel prices fell 7.1 per cent in September from August, as crude prices dropped “amid increasing concerns over weaker economic growth,” Statistics Canada said.
Inflation had eased to two per cent year-on-year in August, hitting the target set by the country’s central bank.
Royce C. Mendes, an economist at Desjardins, noted Tuesday’s data marked the first time inflation in Canada had fallen below two per cent since “the depths of the pandemic,” and urged the Bank of Canada to act decisively at its rate decision meeting on Oct. 23.
As inflation has fallen, the Bank of Canada has lowered its key interest rate three times, from five per cent to the current 4.25 per cent.
Each of the recent cuts has been by 25 basis points, but there have been growing calls for a half-point cut at the bank’s meeting next week.
“The Bank of Canada needs to do something to revive the economy and stop inflation from falling too far,” Mendes said in a comment reacting to Tuesday’s data.
“Our view is that a 50-basis-point rate cut is the right dose of medicine.”
In a comment reacting to the latest inflation figures, TD Bank said the overall picture points to falling concerns about inflation.
TD said the market is increasingly betting on a 50-basis-point cut on Oct. 23 but noted that given the continuing strength of the Canadian jobs market, the bank “would be validated in maintaining its steady rate-cutting pace” of a quarter point.
