CPI Falls in January
2.9% Year-Over-Year Increase
Inflation Eases, Economic Growth Projections Revised
The Consumer Price Index (CPI) in Canada dipped by -0.3% in January 2024, bringing the year-over-year increase down to 2.9%. This marks a notable decline from the 3.4% annual growth rate recorded in December 2023.
The decrease in inflation is primarily attributed to a decline in food prices, particularly for fresh produce. However, the overall impact on inflation was partially offset by higher costs in categories such as shelter, transportation, and recreation. Despite the slight drop, the CPI remains above the Bank of Canada's target of 2%.
In response to the easing inflation, economists have revised their GDP growth projections for 2025. The International Monetary Fund now anticipates growth of 2.1%, up from the previous estimate of 1.9%. This upward revision reflects the expectation that lower inflation will provide consumers with more disposable income and boost economic activity.
The Bank of Canada is closely monitoring the inflation situation and is expected to make a decision on interest rates later this month. While the recent decline in CPI may provide some relief, the Bank is likely to remain cautious in its approach to monetary policy.
Overall, the January CPI report signals a moderation in inflation, which is a positive sign for the Canadian economy. However, the Bank of Canada will continue to assess the situation and may need to take further action to bring inflation back to its target.
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