June 20, 2014 / 12:48 PM / 5 years ago

What low inflation? Canada's rate up to 27-month high

Canada's Finance Minister Joe Oliver makes remarks to the press during the IMF/World Bank 2014 Spring Meetings in Washington April 11, 2014. REUTERS/Mike Theiler

OTTAWA (Reuters) - Costlier energy unexpectedly pushed Canada’s annual inflation rate to a 27-month high of 2.3 percent in May from 2.0 percent in April, while a rise in core inflation also defied the Bank of Canada’s low-inflation forecasts.

Statistics Canada reported on Friday that core inflation jumped to 1.7 percent, the highest since July 2012, from 1.4 percent in April. The median forecasts in a Reuters survey of economists were for 2.1 percent inflation overall and 1.5 percent for core, which strips out volatile elements.

The Bank of Canada aims to keep inflation at 2 percent and within a band of 1 to 3 percent, but inflation has for long generally been in the bottom half of that range, and the central bank has flagged low inflation as one of its biggest concerns. In April it projected second quarter inflation of only 1.6 percent overall and 1.2 percent for core.

May’s inflation rate was the highest since the 2.6 percent registered in February 2012. The year-over-year rise in prices was led by an 8.4 percent jump for energy, including 6.3 percent for gasoline, 21.3 percent for natural gas and 7.0 percent for electricity.

Month on month, overall and core prices rose 0.5 percent, with energy up 0.9 percent, gasoline up 0.8 percent and food up 0.8 percent.

Reporting by Randall Palmer; Editing by Chizu Nomiyama

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