Canada: Inflation jumps in February, will likely weigh on Bank of Canada's plans
March 23, 2018
Seasonally-adjusted consumer prices rose 0.2% from a month earlier in February, easing from January’s 0.5% increase. According to Statistics Canada, February’s deceleration came as most components in the index moderated from January. Food prices were flat from a month earlier, while clothing and footwear prices fell.
On the other hand, inflation jumped to 2.2% in February (January: 1.7%) on higher gasoline prices from a year ago, as well as increased mortgage-interest costs. February’s reading landed above the midpoint of the Bank of Canada’s target of 2.0% plus/minus 1.0 percentage point for the first time in three months and came in above market analysts’ expectations of a 1.9% print. Higher inflation will certainly factor into the Bank’s decision making and could prompt officials to pull the next rate hike—a number of analysts expect at least two more hikes this year—forward should above-target price pressures be sustained in the near term. Most recently on 7 March, officials were dovish on weak incoming economic data, although higher inflation will likely alter their calculus somewhat by the next meeting on 18 April.
Meanwhile, annual average inflation was stable from a month earlier at 1.6%. Core inflation, which excludes volatile items including fuels and fresh produce, ticked up to 1.5% (January: 1.2%).
Canada Inflation Forecast
The Bank of Canada expects inflation to average 2.0% in 2018 and 2.1% in 2019. FocusEconomics Consensus Forecast panelists foresee inflation averaging 2.0% in 2018, which is unchanged from last month’s forecast. For 2019, our panelists also expect inflation to average 2.0%.