B.C.’s inflation rate steady, with interest rate announcement in June

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British Columbia’s inflation rate has remained steady at 2.9 per cent, as hope grows for a drop in interest rates next month.

On Tuesday, the federal and B.C. governments each released their latest inflation figures.

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According to the B.C. Stats Consumer Price Index, a set list of consumer items cost 2.9 per cent more in April 2024 than in April 2023.

The federal government says that inflation in April 2024 was 2.7 per cent over the same month last year, representing a three-year low.

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To calculate inflation, economists look at a fixed set of consumer items and track their prices month over month and year over year. The year over year figure is most generally used to define the inflation rate.

During the height of the COVID-19 pandemic, Canada’s inflation rate was less than one per cent, after floating at around two per cent in the decade before.

This led the Bank of Canada to drop interest rates to record levels in a bid to stimulate the economy.

It worked, and by June 2022, inflation had peaked at 8.2 per cent.

To deal with a cost of living crisis, the BoC started increasing rates in March 2022 from 0.25 per cent to five per cent in July 2023. The rate has sat at five per cent since then, as inflation has steadily fallen.

Andrew Grantham, executive director of economics at CIBC, said the data “provided the all clear” for the Bank of Canada to begin cutting rates.

“At the time of the April interest rate decision, the Bank of Canada Governor stated that policymakers were encouraged by recent subdued inflation readings, but needed those to persist for longer before cutting interest rates,” he wrote in a note to clients.

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“Since then we have received two more months of data pointing to tame underlying inflation, for a total of four in a row, and because of that we continue to forecast a first rate cut at the next meeting (on June 5).”

While B.C.’s inflation figure for April is 2.9 per cent, there is a lot of variance within the parcel of consumer items.

For example, the price of shelter increased 6.8 per cent over the course of the year, compared to a drop of 5.8 per cent for clothing and footwear.

Transportation costs rose 2.8 per cent, while alcohol and cannabis rose in price by 2.2 per cent.

The B.C. Stats report noted that home and mortgage insurance had increased 10.7 per cent. Fuel oil costs rose six per cent while the cost of natural gas fell 7.9 per cent.

Food prices increased 2.6 per cent and within that, fruit and nut prices remained the same, while vegetables rose 5.1 per cent.

Food distribution expert and Dalhousie University Professor Sylvain Charlebois said that, nationally, food inflation decreased for the fourth consecutive month in April, falling to 2.3 per cent from three per cent in March.

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“Food purchased from stores experienced a year-over-year increase of 1.4 per cent, the lowest since July 2021. This marks the first instance since November 2021 where food inflation has fallen below the general inflation rate. This is undoubtedly positive news, especially given the challenging years we have endured,” Charlebois said in a post on X.

B.C. Stats reported that overall prices rose 0.6 per cent from March to April 2024.

Regionally, the inflation rate in Vancouver in April was 3.5 per cent and in Victoria was 2.7 per cent.

Among the provinces, Nova Scotia reported the highest inflation at 3.1 per cent, while Manitoba reported inflation of just 0.4 per cent.

Andrew DiCapua, senior economist at the Canadian Chamber of Commerce, said Tuesday’s data should give the Bank of Canada more confidence that inflation is stable.

“A rate cut in June is not just possible; it’s becoming the main consideration,” he said.

Tu Nguyen, an economist with RSM Canada, said a June rate cut is now a “no-brainer.”

With file from Financial Post

dcarrigg@postmedia.com

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