top of page

February inflation rate slows to 2.8% as price growth unexpectedly eases

Canada's February inflation rate came as a surprise to many, dipping to 2.8 percent compared to January's 2.9 percent, according to the latest report from Statistics Canada. This unexpected ease in price growth marks the second consecutive month of softening inflation, contrary to economists' predictions of a rise driven by increased gasoline prices.

The report, released on Tuesday, highlights notable decreases in the prices of cellular and internet services, with wireless services plummeting by 26.5 percent and internet prices dropping by 13.2 percent compared to a year ago. This decline in communication costs contributed significantly to the overall moderation of inflation.

Furthermore, the growth in grocery prices, which typically exerts substantial upward pressure on inflation, slowed down in February. Prices for food purchased at stores saw a 2.4 percent increase from the previous year, marking the first time grocery prices rose more slowly than overall inflation since October 2021. Despite this moderation, Canadians are still grappling with considerably higher food prices compared to previous years, with a notable 21.6 percent increase between February 2021 and February 2024.

Housing costs, including mortgage interest and rent, continued their upward trajectory, contributing to inflation pressures. Mortgage interest costs soared by 26.3 percent annually, while rent increased by 8.2 percent. These persistent increases in housing expenses underscore the challenges faced by many Canadians in managing their budgets amid rising living costs.

However, the February report brings some relief to policymakers at the Bank of Canada. The central bank has been closely monitoring inflation trends, seeking evidence that price growth is on a sustainable path towards its two percent target. The unexpected easing in inflation, coupled with declines in core measures that strip out price volatility, provides a favorable outlook for the Bank of Canada's monetary policy decisions.

CIBC economist Katherine Judge described the report as "unambiguously good news," indicating a positive shift in inflation dynamics. The findings align with expectations of a potential interest rate cut by the Bank of Canada, with economists anticipating a move as early as June.

Overall, while Canadians continue to face challenges posed by high housing costs and lingering inflationary pressures, the February report offers a glimmer of optimism regarding the country's economic outlook. With inflation showing signs of moderation and policymakers poised to respond with appropriate measures, there is cautious optimism for a more stable and balanced economic landscape in the coming months.