Another welcome drop in the rate of inflation arrived in February. The annualized rate slowed to 5.2% from 5.9% in January.
The decline is better than expected. However, Statistics Canada points out the drop sounds more dramatic than it actually is, because it is being compared to February of last year, which saw a sharp increase in inflation due to the Russian invasion of Ukraine.
Food and fuel remain as key elements in the latest numbers. Falling gasoline prices led the pullback in inflation, while rising grocery costs persisted as a strain on household budgets. With those two volatile items removed from the calculation “core” inflation stands at 4.8% for February, down a notch from 4.9% in January
The Bank of Canada’s preferred measures of core inflation also continued to ease: “CPI Trim” fell to 4.8% in February from 5.0% in January; “CPI Median” dipped to 4.9% from 5.0%; “CPI Common” slowed to 6.4% from 6.6%.
For homeowners and homebuyers there is a mixed message. For owners, replacement cost, which relates to the price of new homes, rose at an annual pace of 3.3% compared to 4.3% in January. Other owned accommodation expenses, which includes real estate commissions, eased to 0.2%, from 1.1%, month-over-month.
For buyers, mortgage interest cost remains a key driver of inflation, rising 23.9%, up from 21.2% in January.
The Bank of Canada’s next rate setting is April 12th. With the good inflation news and the current banking turmoil in the U.S. and Europe, most market watchers expect the BoC will continue to pause its rate hikes.