Less than a month after calling Canada’s inflation numbers “unfavourable” and “disappointing,” economists are singing a much different tune this time around.

On Tuesday, Statistics Canada reported inflation fell to 2.9 per cent in January, down from 3.4 per cent in December and well below economists’ forecast for the month. When looking deeper into the data, each of Canada’s underlying inflation numbers fell as well.

The announcement comes as good news to consumers and the Bank of Canada, which has been trying to bring inflation back to its two per cent target.

“This is great news for those that are looking at the band between one and three per cent, we hit that before, once before we got to 2.8 per cent,” Pedro Antunes, chief economist at Conference Board of Canada, told BNN Bloomberg in a television interview on Tuesday.

“We're there again, between one and three per cent is the bank's target range. So this is really great news actually.”

Randall Bartlett, senior director of Canadian economics at Desjardins, said the data “surprised everyone.”

“There is a lot to like in today’s inflation release. Every measure of inflation came in below expectations,” Bartlett wrote in a report.

What happens to interest rates?

When it comes to rate cuts, Antunes doesn’t believe Tuesday’s data changes the Bank of Canada’s timeline.

“Our central bank has been more hawkish, much more prudent around their wording about when they're going to lower interest rates,” he said. I don't think this necessarily changes the timing of that. I think we're probably still going to see something not before mid-year in terms of starting to see rates coming down.”

Antunes also believes the Bank of Canada will wait for the U.S. Federal Reserve to cut rates before considering a similar move.

“I do think that Canada will probably be more on the sidelines until we start to see rates coming down in the U.S.,” he said.

“I think the bank is going to be very reticent to start to lower rates ahead of anybody else here, especially ahead of the U.S.”

Shannon Terrell, a financial expert with NerdWallet Canada, agrees that January’s inflation is a good sign for those hoping for interest rate cuts.

"January’s inflation data is an encouraging indicator for those awaiting relief from high-interest rates, as the country’s inflation data influences the Bank of Canada’s rate decisions,” she wrote in a statement on Tuesday.

Bartlett also believes rate cuts won’t come till later this year.

“Along with ongoing weakness in the (central) bank’s consumer and business surveys, January’s deceleration in inflation helps to reinforce the case for rate cuts to begin in Q2 2024. This despite the surprising strength of the Canadian economy at the end of 2023 and start of 2024.”

Meanwhile, Veronica Clark, an economist with Citi Financial, still believes rate cuts aren’t expected until the summer.

“We still think officials would be cautious to not re-stimulate housing demand by cutting rates before or during the spring buying season,” she wrote in a report Tuesday. “Slowing core inflation measures continue to closely follow the (Canadian Federation of Independent Business) price plans measure but still suggest BoC (Bank of Canada) officials will not have enough consistently around-target data to cut rates before July.”