Inflation drops to 1.6% in September, opening way for half-point cut

UNSPLASH/Les routes sans fin(s)

Falling gasoline prices were the main driver of easing inflation in September. 

Consumer price pressures continued to ease dramatically, with annual inflation falling below the Bank of Canada’s 2 per cent target for the first time since early 2021.

Inflation fell to 1.6 per cent on a year-over-year basis in September, the lowest since February 2021, Statistics Canada reported Tuesday. On a month-over-month basis, the consumer price index dropped 0.4 per cent—the biggest one month decline in almost two years.

The positive inflation reading sets the stage for the Bank of Canada to aggressively continue its rate cutting cycle, with Bloomberg reporting that markets are pricing in a 75 per cent chance of a half-point rate cut at the next policy decision on Oct. 23.

Falling gasoline prices were the main driver of easing inflation, down 7.1 per cent in September, following a 2.6 per cent decline in August.

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