Canada's inflation rate finally hit the Bank of Canada's target. What does that mean for prices?

Canada's inflation rate decreased to two per cent in August, Statistics Canada reported on Tuesday, finally hitting the Bank of Canada's target in its long campaign to cool price growth.

The central bank began aggressively hiking interest rates in April 2022 to tame skyrocketing inflation, and it made its first rate cut since March 2020 in June.

«Our confidence that inflation will continue to move closer to the two per cent target has increased over recent months,» Bank of Canada governor Tiff Macklem said at the time.

Last month's two per cent rate marks the slowest pace of growth since February 2021. The Bank of Canada's preferred core measures of inflation also ticked down a notch.

«Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,» CIBC senior economist Andrew Grantham wrote in a note to clients.

«We continue to forecast a further 200 [basis points] of interest rate cuts between now and the middle of next year,» he said.

Inflation edged down in August mostly due to a drop in gasoline prices, which are considered volatile. When gasoline is excluded, the rate came in at 2.2 per cent.

The target was reached. What does that mean for prices?

Even as the Bank of Canada has hit its target, Canadians might not be feeling the impact of lower inflation when they're shopping for groceries or other goods.

That's because while the pace at which prices grow has slowed, they mostly remain elevated, said Pedro Antunes, chief economist at the Conference Board of Canada.

«The bank isn't targeting for prices to come back down to where they were pre-pandemic or [before] that big inflation period. What they're really looking for is,