Inflation rate remains at 1.3% on lower energy prices

Canada's annual inflation rate remained at 1.3 per cent in August as lower energy prices continued to keep a lid on the overall cost of living.

The cost of gas has dropped 12.6% in the past year

Consumers paid more for 7 of the 8 major components Statistics Canada tracks, led by a 3.6% jump in food prices 3:11

Canada's annual inflation rate remained at 1.3 per cent in August as lower energy prices continued to keep a lid on the overall cost of living, Statistics Canada reported Friday.

The rate matched economists' forecasts.

Consumers paid more for seven of the eight major components Statistics Canada tracks, led by a 3.6 per cent jump in food prices. Meat was 6.3 per cent more expensive than it was a year ago.

The transportation index was the lone decliner, thanks to falling gasoline prices. Pump prices were 12.6 per cent lower in August than they were a year earlier.  

Nine provinces recorded a year-over-year rise in consumer prices. The highest inflation rate was in Saskatchewan, at 1.9 per cent, the same as a month earlier.  

Prince Edward Island was again the only province to see prices fall year-over-year, with its CPI down 0.1 per cent. P.E.I. has recorded negative CPI for nine consecutive months.  

Core inflation slips

The core rate of inflation, which excludes such volatile items as gasoline, fruits and vegetables, mortgage interest costs, and cigarettes, slipped to 2.1 per cent in August. It had been 2.4 per cent the month before.

"Canadian core CPI has been elevated all year mainly as a result of the weak Canadian dollar," said Scotiabank economist Derek Holt in a commentary.

"Given the fact that currency pass-through operates with a lag, we expect this trend to continue for some time moving forward," he said.

Economists said this inflation report likely won't change the Bank of Canada's overall outlook on interest rates, at least in the short term. "But that could all change quickly if the economy underperforms the Bank's short-term economic growth assumptions as we expect," noted David Madani of Capital Economics.

"Accordingly, we still expect the Bank to eventually cut rates again in the not too distant future."

But Dawn Desjardins, assistant chief economist at RBC Economics, said she expects the Bank of Canada "will be content" to hold its key lending rate at 0.50 per cent.

"This week's strong manufacturing report, the earlier-reported rise in exports in July, and elevated level of auto sales are consistent with the economy posting a second consecutive increase in real gross domestic product in the month and built on June's 0.5 per cent surge," she said.

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