Canada's Inflation Slowed in March to 1.4%

Canada’s annual inflation rate unexpectedly slowed in March to 1.4 percent from 1.6 percent the previous month, as clothing and mortgage interest expenses declined while gasoline costs rose., Bloomberg 4/23/2010 11:59:52 AM

The consumer price index excluding eight volatile items also slowed to 1.7 percent from 2.1 percent, Statistics Canada said today in Ottawa.

The Bank of Canada will start raising its key policy rate because of faster-than-expected inflation and economic growth, Governor Mark Carney said yesterday, after dropping a conditional commitment” on April 20 to keep it unchanged at a record low. Inflation will be slightly higher” than the bank’s 2 percent target over the next year, the central bank’s quarterly forecast report said yesterday.

In the inflation report, six of the eight main categories tracked by Statistics Canada increased in March from a year earlier. Clothing and footwear prices fell 2.2 percent, led by women’s apparel. Statistics Canada’s index of shelter costs declined 0.7 percent as mortgage interest costs fell 6 percent in March and natural gas dropped 22 percent.

Transportation prices increased 6 percent, led by a 17 percent increase for gasoline. Food prices increased 1.3 percent and automobile insurance premiums increased 5.5 percent.

Overall inflation was unchanged on a monthly basis after gaining 0.4 percent in February. Core consumer prices fell 0.2 percent on the month after February’s 0.7 percent increase, which was the fastest since November 2008.

The Bank of Canada said this week that the faster-than- expected rise in inflation for January and February was due in part to transitory effects such as rising hotel costs during the Vancouver Winter Olympics. Traveler accommodation costs on a monthly basis fell 14 percent in March, bringing them back toward where they were in January, Statistics Canada said.