Pace of inflation falls - MoneySense

Pace of inflation falls

Interest rate hike pushed back to spring 2012


The pace of inflation slowed somewhat in July due to easing of gas price increases, allowing the Bank of Canada to keep interest rates at their rock-bottom levels.

According to Statistics Canada, the consumer price index rose at an annual pace of 2.7 per cent in July, down from a 3.1-per cent increase for June. It was the first time that inflation was below a pace of three per cent since February.

Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney appeared before the House of Commons finance committee Friday to discuss the recent volatility on global stock markets and fears of debt crises in Europe and the U.S.

The U.S. Federal Reserve said last week that it aims to keep its key interest rate near zero through the middle of 2013, a move which makes it difficult for the Bank of Canada to raise its rate. Until recently, the Bank of Canada was expected to raise interest rates in the fall of 2011 to curb inflationary pressures in the Canadian economy, but economists now believe that won’t happen until the spring of 2012 at the earliest.