Canada Inflation Quickens

Canada’s consumer prices rose in January at the fastest pace in more than a year, bringing the inflation rate closer to the central bank’s target, boosted by higher automobile ownership costs., Bloomberg 2/18/2010 9:59:10 AM

Prices rose 1.9 percent in January from a year earlier, the most since November 2008, Statistics Canada said today in Ottawa. The median estimate in a Bloomberg News survey of economists was for a 1.8 percent rise following a 1.3 percent gain in December. The monthly inflation rate in January was 0.3 percent, matching the median forecast.

Accelerating inflation may add pressure on the Bank of Canada to raise interest rates from record lows, economists said. Governor Mark Carney cut the benchmark rate to a record 0.25 percent in April and has pledged to keep it there through June unless the inflation outlook shifts.

Policy makers predict that inflation on a quarterly basis won’t return to their 2 percent target until the third quarter of next year.
Price Stickiness

Most of the gain came from gasoline prices, which rose 24 percent in January from a year earlier. Vehicle insurance premiums rose 7.7 percent and the price of new cars gained 3.1 percent, the first increase since June 2007, Statistics Canada said.

The so-called core inflation rate, which excludes gasoline and seven other volatile items, rose 2 percent on an annual basis in January, compared with 1.5 percent the previous month, led by the gain in new car prices. On a monthly basis, the core rate was 0.1 percent.

Canada Inflation Quickens