Canada’s Inflation Edges toward the Lower End of BOC’s Band

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Canada’s Inflation Edges toward the Lower End of BOC’s BandLower clothing and gasoline prices saw Canada’s inflation rate edge closer to the low end of the central bank’s mark in February.

Consumer price index surged 1.1 percent last month up from a year earlier, after rising 1.5 percent in January, according to Statistics Canada report.  The core rate, which is adjusted for eight volatile items, rose 1.2 percent after inching 1.4 percent higher in January.

The Canadian dollar jumped, fuelled by the faster-than-expected rise in prices. Retail sales also rose 1.3 percent in January-the fastest in eight months, after plummeting 1.9 percent in December, easing the burden on Bank of Canada’s Governor Stephen Poloz.

Poloz disclosed on March 18 that he won’t rule out an interest rate cut if the economy slowed down. In January, the central bank forecasted that inflation will attain the 2 percent target at the end of 2015.

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 “We are still seeing generally modest inflation pressures,” said Sal Guatieri, a Toronto-based senior economist at BMO Capital Markets told Bloomberg. “We will see some upward drift in inflation in coming months.”

The Canadian dollar climbed 0.3 percent at C$1.1213 a U.S. dollar in mid-morning trade in Toronto, up from four-year lows at the beginning of the week. Analysts expect the currency’s slump to fuel inflation by increasing import costs.

Gasoline costs plunged 1.3 percent last month from a year earlier after rising 4.6 percent in January. Clothing prices fell 0.4 percent in February after gaining 1.5 percent the previous month.

However, the largest factors for the rise in inflation were a 1.1 percent gain in food costs and 2.2 percent surge in shelter prices, said Statistics Canada. Seasonally adjusted inflation grew 0.3 percent last month, while the adjusted core rate climbed 0.2 percent.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com