January inflation up, rate pressure muted

Fri Feb 17, 2012 11:07am EST
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By David Ljunggren

OTTAWA (Reuters) - Canada's annual inflation rate rose more than expected in January, boosted by higher energy and transportation prices, but the increase is unlikely to spur the Bank of Canada to raise interest rates this year.

The annual rate inched up to 2.5 percent in January from 2.3 percent in December, Statistics Canada said on Friday. The year-over-year advance was slightly bigger than the 2.3 percent predicted by economists.

The Bank of Canada, whose target range for inflation is 1 percent to 3 percent, has made it clear it will keep interest rates low for the time being. Most economists expect the next rate hike in early 2013.

"We are not seeing aggressive pressures one way or the other, so it just confirms the Bank of Canada's very neutral stance at this point," said Mark Chandler, head of fixed income and currency strategy at RBC Capital Markets.

The central bank held its key interest rate at an ultra-low 1 percent in January for the 16th straight month and gave no indication it planned to move rates either up or down.


For a graphic on Canadian inflation see: link.reuters.com/xas66s

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