Inflation climbs to highest since Sept 2005

Wed Jul 23, 2008 9:20am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Louise Egan

OTTAWA (Reuters) - Annual inflation sped past expectations to 3.1 percent in June from 2.2 percent in May after the biggest yearly surge in gasoline prices since Hurricane Katrina, Statistics Canada said on Wednesday.

June marked the first time since September 2005 that inflation rose past the central bank's target range of 1-3 percent. The Canadian dollar rose slightly after the report.

But the Bank of Canada, which last week forecast inflation would peak at 4.3 percent early next year, has signaled it will not try to curb the rampant price growth through interest rate hikes because it expects the underlying price trends to stay in check.

The June results proved it right. Core inflation -- which strips out volatile items like gasoline and food -- was unchanged from May at a tame 1.5 percent.

Financial markets had expected total inflation of 2.9 percent and a core rate of 1.6 percent. Excluding only gasoline, consumer prices rose 1.8 percent.

"The idea that it's gasoline pushing up consumer prices has already been very well telegraphed so there's not really a heck of a lot of surprise in the number set here," said Stewart Hall, market strategist at HSBC Canada.

"There's no reason to really believe that there is any kind of monetary response to come off of this," he said.

The Canadian dollar moved to C$1.0098 to the U.S. dollar, or 99.03 U.S. cents, from its pre-data level around C$1.0100 to the U.S. dollar, or 99.01 U.S. cents. Government bonds were little changed.   Continued...

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