Canada's inflation cools to 2% in August, the smallest gain since early 2021

Canada's annual inflation rate reached the central bank's target in August at it cooled to 2 per cent, its lowest level since February 2021, data showed on Tuesday.

Canada's annual inflation rate reached the central bank's 2 per cent target in August, its lowest level since February 2021, data showed on Tuesday.

The closely watched core price measures also cooled to their lowest levels in 40 months while month-on-month consumer prices deflated by 0.2 per cent, Statistics Canada said.

Analysts polled by Reuters had forecast the consumer price index (CPI) would cool to 2.1 per cent from 2.5 per cent in July on an annual basis, and expected it to be unchanged on a monthly basis.

The Canadian dollar weakened on the news, dipping 0.2 per cent to C$1.1361 to the U.S. dollar, or 73.45 U.S. cents.

The easing of price pressures was primarily helped by a drop in prices of gasoline, telephone services and clothing and footwear, while shelter costs - mortgage and rents - continued to cool at a tepid pace as rents maintained their relentless rise.

At the Bank of Canada's monetary policy decision announcement earlier this month, Governor Tiff Macklem said the central bank had to increasingly guard against the risk that inflation could fall below its target as economic growth was weak.

The BoC has reduced its key policy rate three times in a row, cutting by a cumulative 75 basis point to 4.25 per cent.