Canadian inflation rose 1.1 per cent in February from a year earlier as gasoline prices increased for a third straight month, the government said Wednesday.
The hike in gasoline prices came amid a gradual recovery in global demand, as well as crude oil supply cuts in major oil-producing countries and shutdowns in the southern United States due to bad weather.
On a monthly basis, the consumer price index rose 0.1 percent in February.
Analysts had expected it to rise 0.7 percent. According to Statistics Canada, low-interest rates and strong demand for homes with more space continued to push prices higher for new housing, marking the largest yearly gain since February 2007.
The costs of food, passenger vehicles and household appliances such as stoves and refrigerators were also up. Costs of hotel accommodations, meanwhile, remained low as public health authorities maintained restrictions on non-essential travel to slow the spread of Covid-19. Prices for telephone services and clothing were also up in the month.
While February’s gain was modest, inflation is expected to accelerate in the coming months, testing the 3% upper threshold of the Bank of Canada’s control range, then dropping back to around the 2% target as current months are compared to year-ago numbers, analysts say.
The Bank of Canada has signaled it does not plan to raise interest rates until 2023, though it is set to review the forecasts that underpin its guidance in April. Economists expect the central bank to reduce its bond purchases as soon as next month.
“Generally speaking, you don’t have emergency levels of disinflationary pressures to justify emergency levels of stimulus, in my opinion,” said Derek Holt, vice president of Capital Markets Economics at Scotiabank.
Gas prices rose for the third consecutive month, Statscan said.
Excluding gasoline, annual inflation rose 1.0% in February, down from 1.3% in January.
The Canadian dollar was trading 0.1% lower at 1.2464 to the greenback, or 80.23 U.S. cents, but holding near an earlier three-year high.
