There may be some good news for clients with variable rate debt. StatsCan reported today that the annualized inflation rate edged down one-tenth of a point to 2.2% in February.

While that may be above the Bank of Canada’s target of 2%, the underlying core inflation rate fell to 0.9%. That’s its lowest level since the government started keeping records for the core rate in 1984.

Economists had forecast an annual core rate of 1.1% and headline inflation to remain at 2.3%, which is what it was in January.

“While the rest of the world seems to be grappling with rising inflation pressures, Canada is going in the opposite direction—both headline and core inflation have eased since the start of the year,” BMO Capital Markets deputy chief economist Douglas Porter wrote in a note to investors.

“This is set to reverse next month, as Canada gets with the global program, but the low starting point is very favourable. Suffice it to say that this keeps the pressure well off the Bank of Canada to get back in tightening mode any time soon.”

Market reaction

“Slightly positive for bonds and negative for the (Canadian dollar) this morning,” observed Krishen Rangasamy of CIBC World Markets. “However, expect both the annual headline and core rate to move higher in March on a year on year basis.”

Prices were higher in February in six of the eight major components tracked by the agency, although such items as women’s clothing, footwear and travel tours cost less than a year ago.

On a month-to-month basis, consumer goods were 0.3% more expensive last month than in January, mostly due to higher energy and gasoline prices.

On a regional basis, Nova Scotia remained the province with the highest inflation rate at 3.4%. Alberta continued to enjoy the most stable prices, with an inflation rate of 1.2%.

Drivers in every province except Manitoba faced double-digit price increases for gasoline on a year-over-year basis. The price at the pumps was up 15.7% from a year earlier.