April inflation tops forecast at 1.8 percent

Fri May 21, 2010 7:56am EDT
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By Louise Egan

OTTAWA (Reuters) - Canadian inflation was slightly higher than expected in April on a rise in gasoline and auto prices, keeping alive the possibility of a June interest rate hike by the Bank of Canada.

The consumer price index gained 0.3 percent in the month for an annual inflation rate of 1.8 percent, Statistics Canada said on Friday. The rate quickened from 1.4 percent in March and topped the consensus forecast of 1.7 percent.

Analysts said the report did little to change the overall inflation outlook and would not likely be the main factor determining central bank policy.

"I don't think it really adds a lot to the mix for the June 1 rate decision. The way it stands now, it's slightly tilted for the bank to go," said Mark Chandler, fixed income strategist at RBC Capital Markets.

The Canadian dollar briefly firmed just after the report but then weakened to C$1.0722 to the U.S. dollar, or 93.27 U.S. cents, from C$1.0696, or 93.49 U.S. cents just before the data.

Gasoline prices contributed most to the rise in CPI, while natural gas prices rose for the first time in a year.

Seven of the eight components of the CPI showed price increases in the year to April, Statscan said.

Core CPI, which excludes volatile items like gasoline, climbed 0.3 percent in the month for an annual rate of 1.9 percent, driven mostly by vehicle prices. Analysts forecast a 1.8 percent rate.   Continued...

<p>A gasoline pump nozzle is seen at a gas station in this 2008 file photo. REUTERS/Jim Young</p>