08:49 AM EDT, 09/17/2024 (MT Newswires) -- Canadian inflation locked onto the 2% year-over-year target in August for the first time since 2021 and, even though much of the easing relative to July was due to lower gasoline prices, there was good news within core measures as well, said CIBC.

Tuesday's headline CPI fell from 2.5% year-over-year in July to 2.0% in August, which was a tick weaker than the consensus forecast, noted the bank.

On a monthly basis, prices fell by 0.2%, and rose only +0.1% on a seasonally adjusted basis.

While the increase in mortgage interest costs continued to ease, it remained the largest contributor to the overall CPI increase on a year-over-year basis, stated CIBC. Indeed, excluding MIC, inflation was a mere 1.2% year over year in August.

As well as lower gasoline prices, clothing & footwear prices also fell on the month, which Statistics Canada noted was atypical for August which typically sees increases due to back-to-school shopping. Partly because of this, core measures of inflation remained tame with seasonally adjusted excluding food/energy prices increasing 0.1%, and CPI-trim and CPI-median both advancing 0.2% month over month, pointed out the bank.

With gasoline prices falling further into September, headline inflation should ease again in the next release and CPI excluding MIC could well fall below 1%, according to CIBC.

The bottom line then is that 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 continues to forecast a further 200bps of interest rate cuts between now and the middle of next year.