Canada inflation unchanged in September, well under target

Sat Oct 19, 2013 4:08pm EDT
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By Randall Palmer and Leah Schnurr

OTTAWA/TORONTO (Reuters) - Canada's annual inflation rate held steady last month, while underlying price pressures were also unchanged, suggesting the Bank of Canada has plenty of room to maintain its low interest rate policy.

Annual inflation was 1.1 percent in September, the same as the month before, Statistics Canada said on Friday, slightly higher than economists' expectations for 1.0 percent.

The rise in prices was driven by higher shelter costs, as well as increases in the prices of food and transportation. Core inflation, which strips out volatile items and is closely watched by the Bank of Canada, also held steady at 1.3 percent, just below the market forecast of 1.4 percent.

Both figures were well below the Bank of Canada's target rate of 2.0 percent, reinforcing the view that there is no pressure for the central bank to increase rates when it announces its monetary policy decision next week.

Economists noted the figures were getting close to the lower end of the Bank of Canada's inflation range, which sits at 1 percent.

"There's clearly no inflation pressure in Canada, period," said Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York.

"We're just scraping along the bottom of the target range and that's a lucky break for the Bank because it doesn't have to do anything."

On a monthly basis, overall and core consumer prices were 0.2 percent higher in September than in August.   Continued...

The Bank of Canada building is pictured in Ottawa in this March 3, 2009 file photo. REUTERS/Chris Wattie/Files