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Canada Inflation Slows to 8-Month Low Despite Core Pressures

Canada’s annual inflation rate eased to its lowest level in eight months in April, offering some relief to consumers and policymakers. According to data released by Statistics Canada on Tuesday, the consumer price index (CPI) rose 1.7% from a year earlier, down sharply from the 2.3% increase recorded in March. The decline was driven largely by lower energy prices and the removal of the federal carbon tax, which helped curb price pressures across several categories.

Market expectations had pegged headline inflation to fall even further to 1.6%, according to economists at TD Securities. On a monthly basis, CPI fell 0.1%, compared to forecasts of a 0.2% decline. When seasonally adjusted, prices dropped 0.2%, reflecting a broader softening in consumer cost pressures.

Despite the slowdown in headline inflation, underlying price dynamics remained concerning. The average of the Bank of Canada’s trimmed mean and weighted median core inflation measures accelerated to 3.15% annually from 2.85% in March. That marks the fastest pace of core inflation since June 2024, signaling that price growth outside of volatile categories remains sticky.

The divergence between headline and core inflation complicates the outlook for monetary policy. While cooling headline CPI supports the case for maintaining interest rates, the uptick in core inflation may keep the Bank of Canada cautious about any immediate easing.

Economists now expect the central bank to tread carefully in upcoming meetings, with future rate decisions likely hinging on sustained moderation in both headline and core inflation figures.

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