Soaring Energy Costs Push Canada’s Inflation Rate Past Central Bank’s Target

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Soaring Energy Costs Push Canada’s Inflation Rate Past Central Bank’s TargetCanada’s inflation surpassed the central bank’s goal in May for the first time in 27 months, fuelled by rising energy costs.

Consumer price index accelerated 2.3 percent last month from a year earlier, up from April’s 2 percent, reported the Statistics Canada on Friday. The rising inflation has eased pressure on the Bank of Canada, which has reportedly expressed concerns over the low inflation.

Core inflation, which is adjusted for 8 volatile products such as fuel and food, rose 1.7 percent after rising 1.4 percent in April. This was the highest level since July 2012. Analysts surveyed by Bloomberg had expected inflation to reach 2 percent and core inflation to increase 1.5 percent.

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“We have pretty clearly seen the lows for inflation, at least for some time,” Robert Kavcic, a Toronto-based senior economist at Bank of Montreal, said. “I don’t think the central bank it’s going to change the policy path, but they won’t explicitly be talking about downside risks to inflation.”

The BOC had forecasted in April that inflation would hover around 1.6 percent in April-June quarter, and wouldn’t attain the 2 percent goal until the January-March quarter next year. The core prices were expected to average 1.2 percent in the second quarter and touch 2 percent in the first quarter in 2016.

Energy costs surged 8.4 percent in May from a year earlier, equalling April’s growth rate that was the quickest since November 2011. Food costs rose 2.3 percent last month mostly due to rising meat prices, compared to 1.9 percent in April. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

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