UPDATE - Canada's annual consumer inflation rises 2% in August, slowest pace since February 2021

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By Ovunc Kutlu

ISTANBUL (AA) - Consumer inflation in Canada annually rose 2% in August, increasing at the slowest pace since February 2021, the country’s statistical authority said Tuesday.

The figure marked a deceleration from a 2.5% annual increase in July.

It also reflects a significant slowdown since the 8.1% annual gain recorded in June 2022 – the highest for the consumer price index (CPI) in 39 years.

"The deceleration in headline inflation in August was due, in part, to lower prices for gasoline, due to a combination of lower prices and a base-year effect," Statistics Canada said in a statement.

The agency, however, noted that mortgage interest cost and rent remained the largest contributors to the increase in the CPI in August.

On a monthly basis, the CPI decreased 0.2% in August, compared to the previous month, coming lower than market estimates of no change.

The figure also showed a deceleration from a 0.4% month-on-month decrease in July.

"The monthly decline was led by lower prices for air transportation, gasoline, clothing and footwear and travel tours," said the agency.

- Mortgage interest cost rises at slower pace

Statistics Canada said prices at the pump fell 5.1% in August following a 1.9% increase in July.

"The decline in August 2024 was mainly due to lower crude oil prices amid economic concerns in the United States and slowing demand in China," it added.

The mortgage interest cost index continued to rise, but at a slower pace, with a 18.8% annual gain, increasing for the 12th consecutive month, after it peaked in August 2023 by surging 30.9%.

"Despite slowing price growth, mortgage interest cost has remained the largest contributor to the all-items increase since December 2022," the government department said.

The Bank of Canada on Sept. 4 reduced the policy rate by 25 basis points, its third rate cut in more than four years. The target for the overnight rate was lowered to 4.25%, with the bank rate at 4.5% and the deposit rate at 4.25%.

The central bank's previous rate cut came on June 5 and July 24.

Its next monetary policy meeting will conclude on Oct. 23.