20 September 2006

Economic Update from the Canadian Chamber of Commerce

The following report is from the Canadian Chamber of Commerce’s senior economist.

Statistics Canada reported… that consumer prices, as measured by the All-items Consumer Price Index (CPI), posted a 2.1% increase between August 2005 and August 2006, compared to year-over-year increase of 2.4% the prior month. This was the third consecutive decline in the 12-month variation of the All-items index.

The decline from 2.4% to 2.1% in the 12-month change of All-items CPI was mainly attributable to the slowdown in gasoline price increase paid by drivers at the pump….

The bottom line: … inflation … was pretty much in line with expectations. It reinforces the view that inflation remains well contained and is consistent with the Bank of Canada's decision not to raise interest rates the last two times following a string of seven consecutive rate hikes. The Bank of Canada's next scheduled date for announcing the overnight rate target is October 17, 2006 and it is expected that the Bank will keep its key interest rate unchanged at 4.25% at that time.