Tags: Gasoline | Canada | Inflation | Rate

Gasoline Boosts Canada's Inflation Rate

Friday, 23 March 2012 09:43 AM

Higher gasoline and food prices drove up Canada's annual inflation rate to 2.6 percent in February from 2.5 percent, slightly below expectations but likely becoming more of a concern for the central bank when setting interest rates.

Core inflation, which excludes eight volatile items including gasoline and some food, sped up to 2.3 percent versus market expectations of 2.2 percent rate, Statistics Canada said on Friday.

On a monthly basis, the headline consumer price index climbed 0.4 percent, pressured mainly by gasoline and clothing. The core index also rose 0.4 percent, double the rate of the previous month, on higher vehicle insurance and homeowners' replacement costs.

Another measure of inflation excluding only food and energy came in at 0.3 percent in the month for a 1.7 percent annual rate.

The Bank of Canada targets 2 percent inflation within a control range of 1 to 3 percent. Earlier this month, it noted that inflation had been slightly firmer than it had anticipated, suggesting it may feel pressured to lift its benchmark interest rate from the extremely low 1 percent.

Since the global financial crisis hit, the bank has signaled that it was willing to ignore temporary deviations in the inflation rate from its target due to the extraordinary pressures on the economy from abroad. It may soon be ready to abandon that approach now that there are signs of a U.S. comeback, progress in resolving the European debt crisis and upward revisions to domestic growth rates in 2011. 

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Friday, 23 March 2012 09:43 AM
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