Slowing inflation paves way for further interest rate cuts

The wind appears to be out of the sails of inflation, clearing the way for reduced borrowing costs later this year.

Statistics Canada reported yesterday that the Consumer Price Index rose 2.5% in July, the slowest pace since March 2021. Lower costs for phone services, computers and vehicles offset a slight increase in fuel prices.

“Businesses that have been wary of taking on debt will be a little more optimistic at the prospect of borrowing to invest in the growth of their operations,” Chamber CEO Bruce Williams said. “The economy needs that dynamic to become more productive, increase revenue and provide opportunities to incentivize staff with higher wages and workplace initiatives.”

Slowing inflation won’t bring back lower costs but it will give the Bank of Canada a clear signal to further reduce interest rates.

However, a looming rail strike could impact supply chains and lead to pressure on the price of goods.

In case you missed it yesterday, you can listen to Bruce Williams speaking about inflation and the rail strike on CBC Radio.