Canada Sees a Drop in Inflation in June

Canada Sees a Drop in Inflation in June

July 29, 2010

Inflation dropped in June as the prices of gasoline, clothing and footwear all declined from where they were last year at this time. However, I wouldn’t be surprised if inflation actually increases slightly during the coming months due to the newly implemented HST in Ontario and British Columbia.

Canada’s core inflation rate also dropped from 1.8% to 1.7% in June 2010. Some speculators are worried that Canada may actually be slipping into a deflationary period but, it seems as though the Bank of Canada’s Governor Mark Carney plans to battle this slowing inflation by gradually increasing interest rates over the next while.

Many people are grunting and groaning that Carney’s recent decision to increase rates will have a negative effect by slowing the economy but as I’ve been continually emphasizing, today’s interest rates are still at historically low levels to encourage spending through these seemingly, financially unstable times. This is reinforced by the fact that all the Canadian provinces still recorded positive growth even though some actually showed slowed growth from previous months.