[BC省新聞] Canada's core inflation rate jumps in September led, expected, interest, central, country

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Canada's core inflation rate jumps in September

OTTAWA — Canada's core inflation rate accelerated more than expected in September, reaching the highest level in more than three years and prompting speculation the country's central bank may begin raising interest rates sooner than expected.

Consumer prices overall rose by 3.3 per cent in September from the same month a year earlier, led by higher prices for gasoline and food, Statistics Canada said Friday. That's up from an annual inflation rate of 3.1 per cent in August.

However, the core inflation rate — stripping out volatile items such as food and energy — was 2.2 per cent on an annual basis, up from 1.9 per cent in August. It's the first time the core rate has risen above two per cent since February 2010.

The September core reading is also the largest year-over-year gain since December 2008, with higher costs for vehicles, clothing and insurance premiums contributing to the jump in the rate.

Economists had expected an overall annual rate of 3.1 per cent in September and a core rate of two per cent.

Douglas Porter, deputy chief economist at BMO Capital Markets, said "if core stays anywhere close to these levels — let alone rises further — the BoC may return to the tightening wheel sooner than most currently expect, especially if financial markets eventually calm."

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Statistics Canada said energy prices rose 12.5 per cent during the 12 months to September, compared to a 13.4 per cent annual rate in August. "On a year-over-year basis, gasoline prices rose 22.7 per cent, after gaining 22.8 per cent in August," it said. "Prices for fuel oil rose 27.4 per cent, while prices for natural gas fell 4.7 per cent."


Food prices were up 4.3 per cent in September from a year earlier, following a 4.4 per cent rate in August.


The Bank of Canada aims for an annual inflation rate of two per cent, the midway point of its one-to-three per cent target range.


The bank monitors both overall inflation and the core rate, which it believes is a more accurate measure of underlying trends and provides a better outlook on future price changes.


"Headline inflation remains sticky at just over three per cent, and it's not all fuel and food, as core inflation is gradually creeping higher," said BMO's Porter. "That's a theme that is playing out in much of the industrialized world, despite a hefty output gap in most countries — less so in Canada," he said. "While this result does not completely rule out BoC rate cuts, it relegates them to only the most extreme circumstance."


The Bank of Canada has kept its key interest rate at a near-record low of one per cent for more than a year to encourage spending by consumers and businesses amid a weaker-than-expected economic recovery from the 2008-09 recession.


Many economists do not expect the central bank to begin raising its rate until the second half of 2012.


Canada's core inflation rate accelerated more than expected in September, reaching the highest level in more than three years and prompting speculation the country's central bank may begin raising interest rates sooner than expected.