Canada’s annual inflation rate is picking up, but largely on higher prices at the gas pump and still low from a central banking point of view, underscoring the Bank of Canada’s concerns.
Consumer prices rose 1.2 per cent in December on an annual basis, a faster pace than November’s 0.9 per cent, Statistics Canada said Friday.
The rise in the pace of inflation was primarily driven by higher prices for gasoline, which surged 4.7 per cent. When you strip out the impact of that, consumer prices rose 1.1 per cent annually, though also faster than November’s 1 per cent, the federal agency said.
So-called core prices, which exclude volatile items and help guide the Bank of Canada, increased by 1.3 per cent, again at a greater pace than the 1.1 per cent in November.
Stubbornly low inflation has become the focus of the central bank, which earlier in the week sparked a plunge in the Canadian dollar with a rate announcement and monetary policy report that, while giving no signal on interest rates, still left the door open to a cut.
At the very least, the central bank’s benchmark overnight rate, at 1 per cent, is now seen to be on hold for longer.
“Over all, the inflation picture remains very mild in Canada as evidenced by the three-month annualized core rate of just 0.7 per cent,” said senior economist Krishen Rangasamy of National Bank Financial.
“For 2013 as a whole, the annual inflation rate was 0.9 per cent, the lowest since the 2009 recession, and the second lowest since 1994,” he added.
The Bank of Canada targets an annual inflation rate of 2 per cent, and it does not see getting back there until early 2016. Friday’s report won’t move the ball much.
“While today's report showed an uptick in the year-over-year rates, it will do little to allay the bank's concerns given that over the course of the fourth quarter, the headline rate averaged just 0.9 per cent while the core rate ran at 1.2 per cent,” said assistant chief economist Dawn Desjardins of Royal Bank of Canada.
On a monthly basis, consumer prices slipped 0.2 per cent from November.