UPDATE 1-Canada's overall inflation steady in August, core rate spikes

Fri Sep 19, 2014 8:59am EDT
 
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OTTAWA, Sept 19 (Reuters) - Canada's annual inflation rate was steady at 2.1 percent in August, but the closely-watched core rate unexpectedly jumped above the 2 percent threshold, Statistics Canada data showed on Friday.

The overall rate was in line with analysts' expectations and marked the fourth straight month it has been above the Bank of Canada's 2 percent target.

Statscan said the major driver for the year-on-year increase in overall prices was higher shelter costs, which rose by 2.8 percent in August from a year earlier, compared to a 3 percent 12-month gain in July.

The Bank of Canada's core rate, which strips out the prices of some volatile items, rose to 2.1 percent last month, hitting a level last seen in April 2012, from 1.7 percent in July. Analysts had expected the rate to edge up to 1.8 percent.

The spike in core inflation was fueled by higher telephone and transportation costs, according to Statscan.

The Bank of Canada is taking a relaxed attitude to the overall inflation rate, which peaked at a 28-month high of 2.4 percent in June, and predicts it will drop below 2 percent in the first half of next year.

The central bank said earlier this month that recent data reinforced the view that higher inflation had been attributable to temporary effects "rather than to any change in domestic economic fundamentals." (Reporting by David Ljunggren; Editing by Paul Simao)