On Tuesday, Statistics Canada data showed that Canada’s annual inflation rate eased in August, and the index dropped on a month-over-month basis for the first time this year. The agency said that this happened even though food prices rose at their fastest pace in 41 years.

In August, the country’s annual inflation rate slowed to 7.0 per cent, down from 7.6 per cent in July. It was largely due to lower gasoline prices and slower gains in the shelter index. The consumer price index slipped 0.3 per cent, the largest drop since early in the COVID-19 pandemic.

All three core measures of inflation also eased slightly, with the average edging down to 5.2 per cent from an upwardly revised 5.4 per cent in July. While inflation appears to be slacking off peak levels, it remains far above the Bank of Canada’s 2 per cent target.

This month, the central bank increased its policy rate by 75 basis points to 3.25 per cent and left the door open to another large increase.

Money markets are betting on a 50-basis point hike in late October followed by a smaller 25-basis point move in December to lift interest rates to 4.0 per cent, the highest since early 2008.
The Canadian dollar was trading 0.4 per cent lower at 1.33 per US dollar or 75.19 US cents.