April inflation seen muted despite fuel hike

Mon May 19, 2008 8:15am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Louise Egan

OTTAWA (Reuters) - High-flying gasoline prices have left Canadian consumers feeling like their living costs are spinning out of control, but an April inflation report will likely prove them wrong with rates staying at lows seen in March.

Statistics Canada will release the April inflation numbers on Wednesday at 7 a.m. (1000 GMT).

Markets expect the consumer price index to rise 0.5 percent in April for an annual inflation rate of 1.4 percent, according to the median forecast of 22 analysts in a Reuters poll.

They see the core inflation rate, which strips out gasoline and a handful of other volatile items, climbing 0.2 percent on the month but matching March's annual rate of 1.3 percent, which was the lowest since July 2005.

Inflation below its 2 percent target makes it easier for the Bank of Canada to follow through with a promise to cut interest rates again. Market players expect that to happen on June 10 with a quarter-point cut in the overnight rate to 2.75 percent.

"Not only are we not seeing an upward spike in inflation due to the supposed run-up in food prices and gasoline prices but inflation is actually going the other way," said Doug Porter, deputy chief economist at BMO Capital Markets.

Porter, who penned a note last week lashing out at what he called "a drumbeat of scare stories" in the media about rising prices and a faltering economy, said people fuming about prices at the pump would likely be skeptical about the good news story on inflation.

"It's probably going to lead to that old question: 'does the CPI lie?"'   Continued...