Canada's Inflation Accelerates in January, Could Test 3% in Spring

Canada’s annual inflation rate accelerated more than expected in January, data from Statistics Canada showed on Wednesday, and could continue to rise in coming months compared with the low levels reached a year ago during the first COVID-19 lockdowns, Reuters reported. Canada’s inflation rate accelerated to 1.0% in January on higher durable good and gasoline prices, up from a year-on-year increase of 0.7% in December, and beating analyst expectations of 0.9%. Before easing again, the annual rate could test 3% in April or May due to a combination of higher commodity prices and the statistical comparison to the period of last year’s shutdowns, analysts said. “In the next few months, with the run-up in oil prices in particular ... and when we compare ourselves to what happened a year ago, we are going to get some very big inflation numbers,” said Doug Porter, chief economist at BMO Capital Markets. “So I think this is just an opening salvo in terms of what we are about to see for headline inflation.” But even if inflation were to temporarily top 3%, the upper threshold of the Bank of Canada’s control range for its 2% target, the Bank would be unlikely to change its policy stance, said analysts. Read more.

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