Newspaper article The Canadian Press

Canada's Inflation Rate Unchanged in August at 2.1 per Cent: Statistics Canada

Newspaper article The Canadian Press

Canada's Inflation Rate Unchanged in August at 2.1 per Cent: Statistics Canada

Article excerpt

Inflation unchanged in August: StatCan

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OTTAWA - Canada's annual inflation rate held steady at 2.1 per cent in August, according to new Statistics Canada figures released Friday.

But many observers were caught off guard by an unexpected jump in another key indicator that helps the Bank of Canada decide if it should raise or lower interest rates.

Core inflation, the number the central bank closely monitors and which excludes some items from the volatile energy and food categories, was 2.1 per cent, after an increase of 1.7 per cent in July.

Economists had expected a gain of 1.8 per cent, according to Thomson Reuters.

Statistics Canada said the prices for some of the components in the core index, such as telephone services and passenger vehicles, increased more in August than in July compared with a year ago.

Meanwhile, price increases for gasoline, fresh fruit, fresh vegetables and natural gas, which are excluded from the core index, slowed on a year-over-year basis in August.

Diana Petramala of TD Economics said the jump in core inflation was a bit of surprise, but consistent with the recent pick up in the economy.

"Still, we are inclined not to get worked up over one-month of data. There is still evidence of a significant amount of slack in the Canadian economy," she wrote in a note to investors.

The unemployment rate has held at around seven per cent for the past year, Petramala noted, and prices that are normally tied to economic conditions showed some signs of decelerating in August.

The central bank forecasts for inflation to be about two per cent for the next two and a half years, and for core underlying inflationary pressures to remain below the two per cent target until 2016. …

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