Canada’s inflation rate is back within target after years of strong inflation. Canada’s inflation rate was 2.8 percent in June, Statistics Canada said in its latest report. This is a marked decline after inflation peaked at 8.1 percent last summer.
That’s well within Canada’s inflation target of two to three percent. Finance Minister Chrystia Freeland also boasted about Canada’s lowest inflation among the G7 countries.
But despite this good news, the Bank of Canada is still in the process of reducing inflation. And it is expected that interest rates may soon be raised again rather than cut.
In early July, the Bank of Canada raised the policy interest rate by another 1.25 percentage points to 5 percent. Annual inflation was 3.4 percent in May at the time of the interest rate hike.
Bank of Canada Governor Tiff McClam praised the decline in inflation but warned that the central bank is prepared to raise interest rates again if necessary.
The Bank of Canada said in its new forecast that progress in reducing inflation over the past year may be stalling. Interest rates may hover around three percent next year. This rate of inflation will come down to 2 percent by mid-2025. This means that inflation will take six months longer than the bank’s previous estimate to reach the target.
