Canada consumer prices begin climbing again in October

Wed Nov 18, 2009 9:24am EST
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By Louise Egan

OTTAWA (Reuters) - Inflation returned to Canada in October after a short deflationary bout but prices remained tame and are not expected to sway the Bank of Canada from holding interest rates at a record low until mid-2010.

The consumer price index climbed 0.1 percent in the year to October, mainly due to less downward pressure from gasoline prices and as consumers paid more for food, household goods and services and tuition, Statistics Canada said on Wednesday.

It was the first upward movement since May, a sign the economy is pulling out of a recession, but still below the average forecast in a Reuters poll of a 0.3 percent gain. Prices slipped 0.1 percent on the month.

Core inflation, which provides a reality check by excluding gasoline and other volatile items, came in higher than expected at 1.8 percent, up from 1.5 percent in September after gaining 0.1 percent in the month.

"There is a little bit of heat in this report," said Eric Lascelles, chief economics and rates strategist at TD Securities.

"Headline CPI exited that technical state of deflation which is more symbolic than anything else but still attracts some attention," he said.

Consumer prices fell annually by between 0.3 percent and 0.9 percent in the months from June to September.

The Canadian dollar showed little initial reaction to the report, trading near its pre-data level of C$1.0469, or 95.52 U.S. cents as the market digested the numbers.   Continued...