Inflation rate drops to 5.2% in February, but grocery prices are still on the rise

Canada’s inflation rate fell to 5.2% in February, the sharpest deceleration since April 2020, according to Statistics Canada.

The agency said its consumer price index saw a year-on-year deceleration from February 2022, when the inflation rate was 5.7%.

The reading compared with an annual inflation rate of 5.9% in January and was the lowest reading since January 2022, when it was 5.1%.

Statistics Canada noted that the decline was due to a sharp monthly price increase in February 2022, when the global economy was significantly hit by Russia’s invasion of Ukraine.

Groceries outpace headline inflation

Despite the general cooling, grocery prices remained high and outpaced overall inflation.

Prices for food purchased from stores in February rose 10.6% from a year ago, the seventh consecutive month of double-digit increases.

Meanwhile, energy prices fell 0.6% year over year, with gasoline prices falling 4.7% from a year ago, when prices started to rise. This is the first annual drop in gasoline prices since January 2021.

A woman buys produce at Granville Island Market in Vancouver, July 20, 2022. Prices for food purchased in stores in February rose 10.6% from a year ago, the seventh consecutive month of double-digit increases. (Darryl Dyck/The Canadian Press)

Excluding food and energy, Statistics Canada said prices in February were up 4.8% from a year ago, after a 4.9% year-over-year gain in January.

The annual inflation rate peaked at 8.1% in June 2022, but has declined.

Interest rate hikes aim to calm inflation

The Bank of Canada, which is struggling to bring headline inflation back to its 2% target, left its target policy rate unchanged earlier this month at 4.5%.

It was the first time the central bank has kept its key rate unchanged since it started raising it last year in a bid to rein in rising prices.

The average of the three main measures of inflation that are closely watched by the Bank of Canada fell to 5.37% in February, compared to 5.57% in January.

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