Canada's annual inflation rate slowed to 5.9 percent in January, although grocery prices rose at a faster rate last month.
In a consumer price index report released on Tuesday, Statistics Canada said the decline in headline inflation from 6.3 per cent in December reflected a base year effect.
The base year effect refers to the effect of price movements from a year ago on the year-to-year inflation rate calculation. As much of the jump in price growth occurred in the first half of 2022 as Russia's threat to attack Ukraine turned into reality, the federal agency said the annual inflation rate would continue to slow in the coming months.
The last time Canada's annual inflation rate was below six percent was in February 2022 at 5.7 percent.
Inflation rates were lower in January than most commercial banks expected in their forecasts, signaling good news for the Bank of Canada.
Last month, the Bank of Canada raised its key interest rate for the eighth consecutive time since March 2022, taking it from near zero to 4.5 per cent. That was the highest since 2007. At the time, the central bank said it would take a "conditional" pause to assess the impact of higher interest rates on the economy.
Yet Canadians did not experience a slowdown in grocery costs last month as prices rose faster on a year-over-year basis.
Grocery prices rose 11.4 percent from a year ago, marking an acceleration from 11 percent in December. The federal agency said the prices of meat, bakery items and vegetables all rose faster.
On a monthly basis, higher gasoline prices in January pushed overall price levels higher than in December. The federal agency said the consumer price index rose 0.5 percent in January after falling 0.6 percent a month earlier.
Meanwhile, consumers paid less for cellular services in January than last year when Boxing Day deals extended into last month.
Prices for passenger vehicles also slowed on an annual basis, partly reflecting base-year effects, as vehicle availability was affected by supply chain problems a year ago.
