Why Alberta's inflation rate climbed last month

Though Canada’s inflation rate dropped in January, in Alberta it increased.

According to Statistics Canada’s Consumer Price Index for January 2024, released on Tuesday, Canada's inflation rate dropped to 2.9 per cent from 3.4 per cent the month before.

This as Alberta’s inflation rate increased to sit at 3.4 per cent in January, compared to three per cent in December 2023.

"It’s largely due to a base-effect on electricity prices," said Leanna Wachniak, wealth investment advisor with the Popowich Karmali Advisory Group.

"We had a price rebate in January 2023 that we didn’t repeat this year,”

Canada's inflation rate fell more than what was expected, Wachniak said.

"Economists were largely expecting it to remain unchanged, so this was a bit of a surprise,” she said.

One of the largest contributors to the drop was year-over-year gas prices.

Grocery prices also increased at a slower pace.

"We also saw the cost of air travel went down," said Wachniak.

The Bank of Canada has held the key interest rate at five per cent since the summer, waiting for interest rates to move into its target range of between one per cent and three per cent.

While this month’s inflation data shows the core rate to be within that range, most economists, including Conference Board of Canada senior economist Kiefer Van Mulligen, don't believe the central bank will take this as a cue to move the key lending rate down just yet.

“I think today's report is just one report. I think what the Bank of Canada is looking for is a trend. One of the things they're looking for is a sustained drop in core inflation and there are several core inflation measures,” said Van Mulligen.

“We don't necessarily expect that the Bank of Canada will overreact to this and, you know, cut rates immediately. Most people are saying rates will start to fall, and only start to be cut later this year. This supports that thesis.”