Canada: Inflation moderates in April
May 18, 2018
Seasonally-adjusted consumer prices rose 0.1% from a month earlier in April, matching March’s 0.1% increase. According to Statistics Canada, the increase was driven by higher prices for food; shelter; household operations, furnishings and equipment; and clothing and footwear. The rise was partially offset by lower prices for recreation, education, and reading; transportation; and health and personal care.
Inflation eased from its over three-year high of 2.3% in March to 2.2%, a notch below market expectations. April’s moderation was due mostly to the slower rise is fuel costs. Meanwhile, annual average inflation ticked up to 1.7%, the highest level in three years, from 1.6%. Core inflation, which excludes volatile items including fuels and fresh produce, edged up to 1.5% (March: 1.4%).
April’s milder inflation could discourage the Bank of Canada from raising the target for the overnight rate at its 30 May monetary policy meeting. However, a rate hike should not be entirely written off given above-target inflation and recent economic data pointing to stronger fundamentals in the second quarter. A number of FocusEconomics analysts currently expect a rate hike in the second quarter.
Canada Inflation Forecast
In its April monetary policy report, the Bank of Canada forecast inflation averaging 2.3% in 2018 and 2.1% in 2019. FocusEconomics Consensus Forecast analysts see inflation averaging 2.2% in 2018, which is up 0.1 percentage points from last month’s forecast. For 2019, our panelists see inflation averaging 2.0%.