Canada inflation picks up but still in danger zone

Fri Dec 20, 2013 11:36am EST
 
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By Louise Egan

OTTAWA (Reuters) - Canada's annual inflation rate crept up to 0.9 percent in November from 0.7 percent in October but it remained below the central bank's target range, ensuring that chronically weak inflation will stay on policymakers' radar as a top concern.

The Canadian dollar weakened to a 3-1/2-year low against the U.S. dollar after the Statistics Canada inflation report, which confirmed analysts' expectations that steep discounting by retailers around "Black Friday" would prevent inflation from gaining much momentum in the near term.

A separate report from Statscan on retail sales in October showed unexpected weakness in the sector as purchases of cars declined.

The consumer price index was flat month on month, with the annual CPI rate pushed higher mainly by shelter and food costs, while prices fell for health and personal care as well as for clothing and footwear.

But the annual core CPI, closely watched by the Bank of Canada because it excludes volatile items such as gasoline and food, slipped 0.1 percentage point in the month for an annual rate of 1.1 percent.

Both the total and core inflation rates were slightly below market expectations of 1.0 percent and 1.2 percent, respectively.

"From a policy perspective, (it) helps fuel the growing narrative that the Bank of Canada is becoming increasingly more dovish," said Mazen Issa, a strategist at TD Securities.

"Certainly the risk that the bank adopts an explicit easing bias in January continues to grow and this report lends further credence to that view," he said.   Continued...

 
Canadian loonies, one dollar coins, are displayed in this posed photograph in Toronto, October 10, 2008. REUTERS/Mark Blinch (CANADA) - RTX9EY9