Canada inflation hits target but how much is temporary?

Fri Oct 17, 2014 11:16am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Randall Palmer

OTTAWA (Reuters) - Canadian inflation settled exactly at the Bank of Canada's target of 2.0 percent in September, with the core rate staying at 2.1 percent, according to Statistics Canada data released on Friday.

Bank of Canada Governor Stephen Poloz has said some recent price increases were temporary and so should be ignored, suggesting a lower underlying rate, but for now inflation is at the midpoint of the target range of 1 to 3 percent.

"Mr. Poloz has been pretty consistent about brushing aside the recent upswing in inflation, and I don't think this will change his tune too much," said BMO Capital Markets chief economist Doug Porter.

"But I do think it is notable that core inflation is sticking above two percent."

Month on month, consumer prices rose 0.1 percent in September and core prices, which strip out volatile items such as natural gas, increased 0.2 percent.

The annual and monthly rates for total and core inflation came in exactly as forecast in a Reuters survey of analysts.

Shelter costs were 2.7 percent higher in the year to September, with natural gas 16.2 percent more expensive.

Food prices were also 2.7 percent higher, led by an 11.5 percent jump in meat. Costlier meat is an example Poloz cites as being due to temporary factors rather than to a tightening of the economy, and therefore monetary policy should not adjust to it.   Continued...

Canadian one dollar coins, also known as loonies, are displayed in Montreal, September 19, 2007.  REUTERS/Christinne Muschi