Headline CPI inflation moved slightly lower in February to 2.8% year-on-year (y/y), against expectations for an uptick.
Softer inflation at grocery stores was part of the story in February. Grocery price increases cooled from 3.4% y/y in January to 2.4%. This marks the first time since 2021 that grocery inflation was below headline inflation.
In February, gasoline prices flipped to and increase, up 0.8% y/y, versus a 4% y/y decline in January.
Shelter inflation continued to move higher, up 6.5% y/y in February. Rent inflation moved up to 8.2% y/y, while overall cost of owned accommodation was up 6.7% y/y.
Other areas contributing to cooler inflation were cellular and internet services. New cell phone plans were down 26.5% versus a year ago in February for the same level of service, while internet access was down 13.2% y/y.
The Bank of Canada’s preferred “core” inflation measures moved lower in February to average 3.2% y/y, down from 3.4% in January.
Key Implications
February’s inflation report was a little bit of good news for Canadians. After stalling through the second half of last year, that is two months of improvement on the Bank of Canada’s key core inflation gauges. However, the battle isn’t won yet, and we now expect the Bank of Canada will leave the overnight rate unchanged until July, as outlined in our new forecast released today.
