Canada Inflation Research Brief

Inflation decelerates and beats expectation. Canada’s consumer price index rose 2.8 per cent year over year in February, down from the 2.9 per cent reading in January and below the market consensus of a reacceleration to 3.1 per cent. The three-month annualized rate is now down to just 1.3 per cent as it appears past rate hikes are reining in consumer spending and continuing to drive prices lower. February’s drop was headlined by a deceleration in cellular and Internet services as well as food purchased from stores, but weakness in inflationary pressures was broad-based. When stripping out the most volatile components, the Bank of Canada’s preferred measures of core inflation also moderated. CPI-trim and CPI-median rose by just 0.1 per cent monthly, bringing the average three-month annualized rates of core inflation to 2.2 per cent, hitting a level below 3.0 per cent for the first time since April 2021.