According to the latest economic reports coming from North America, the Inflation rate in Canada slowed down to 7 per cent during August 2022. Decreasing oil prices in the international market are shown as the major reason for the deceleration in the inflation rate. In July 2022, the year-to-year Inflation rate was posted at 7.6%.
The pandemic fuelled by COVID-19 virus and the following lockdown in the country had seriously impacted the domestic economy of North American country.
Inflation rates started showing signs of an increase in January 2022 when they jumped to 5.1% from 4.8% in December 2021. The rate of inflation crossed 6 point mark in February and 7 point mark in May 2022.
Inflation in the Canadian economy touched a 40-year high in June 2022 when Statistics Canada published an 8.1% inflation rate.
Statistics Canada is an official agency under the Canadian government which publishes reports and statistics related to resources, economy and society to name a few.
An increase in oil prices in the international markets and political and security crises in global supply chain management triggered price hikes in the economy. Everything from food to gasoline witnessed a jump in its cost.
The Russian invasion of Ukraine which began in February 2022 had also triggered an economic crisis in Europe, the USA and various countries in South America and Asia. Several economies saw inflation rates smashing through the roof.
Worsening weather conditions in Canada along with the increasing cost of inputs are also assumed to be reasons for increasing inflation rates in the economy.
The latest numbers published by Statistics Canada suggest despite a deceleration in oil prices, indexes, or consumer prices increased in August by 6.3% on a year-to-year basis.
A few weeks ago, the Bank of Canada, which is the central bank of the country, increased its benchmark interest rate for borrowing by 75 basis points. The Bank of Canada increased the overnight rate to 3¼% and Bank Rate to 3½%. The deposit rate of the central bank of Canada is currently posted at 3½%.
The interest rate hike in September was the fifth rate hike of the Bank of Canada this year. An analysis of the interest rate hikes and other monetary policies implemented by the Bank of Canada shows that it is following the steps of the Federal Reserve in the United States.
Similar to Federal Reserve, the Bank of Canada also has an interest rate target of 2%. Even though monthly inflation rates are showing signs of deceleration bank of Canada is planning to continue with its aggressive interest rate hikes. The central bank is hoping to control increasing inflation and bring it down to the 2% mark by increasing the interest rate.
Market analysts and economists are expecting another rate hike in October when the central bank meets for monetary policy decisions.