Inflation rate falls to 2.8%

Temperatures are still hot, but at least inflation is cooling. 

What happened: Canada's annual inflation rate dropped to a 27-month low of 2.8% in June, closing in on the Bank of Canada’s headline inflation target of 2%. The bank still expects that closing the gap could take another two years, or in other words, by mid-2025.  

Why it matters: It’s not that we’re saying better-than-expected headline inflation is bad news, but let’s just say the Bank of Canada isn’t calculating bonuses for 2023 just yet. While it’s a step in the right direction, some of the bank’s preferred core measures remain high. 

  • One measure of price changes that excludes short-term swings across volatile food and energy prices (called CPI-Trim) came in at 3.7%, still well above target.
  • Falling gas prices—down 21% since last year—drove much of the inflation slowdown. Excluding that, headline inflation would have come in at 4%.

Bottom line: On the surface, the fight against inflation seems to be going well, but Canadians still feel the pinch in areas where it hurts most, like groceries (up 9.1%) and shelter (up 4.8%).

If it’s any consolation, at least prices cooled across mobile plans, restaurants, and recreation equipment. Guess it’s time to switch providers, go to happy hour, and buy a paddle board?—SB