Canada’s annual inflation rate rises to 4.4%, upping rate-hike pressure
2023.05.16 09:35
© Reuters. FILE PHOTO: A person shops in the beverage aisle at a grocery store in Toronto, Ontario, Canada November 22, 2022. REUTERS/Carlos Osorio
By Ismail Shakil and Steve Scherer
OTTAWA (Reuters) – Canada’s annual inflation rate rose in April for the first time in 10 months, data showed on Tuesday, adding pressure on the central bank to raise interest rates again after having paused its tightening campaign since January.
Annual inflation unexpectedly rose to 4.4% in April, Statistics Canada said. Analysts polled by Reuters had expected the annual rate to edge down to 4.1% from 4.3% in March. Month-over-month, consumer prices gained 0.7% from March, higher than the forecast 0.4% increase.
“The market is under-pricing the probability the Bank (of Canada) comes back and hikes again,” said Derek Holt, vice president of capital markets economics at Scotiabank. “I don’t see any slowing down in terms of the underlying price pressures.”
The central bank has kept rates unchanged at its last two policy setting meetings as it assesses whether its eight-consecutive rate hikes have been sufficient to tame inflation.
BoC Governor Tiff Macklem has said that Canadian inflation risks getting stuck significantly above the Bank of Canada’s 2% target, and if that happens the central bank is ready to hike interest rates further.
Higher rent and mortgage interest costs contributed the most to the annual inflation rate in April, Statscan said. The higher interest rate environment may have contributed to rising rents by stimulating higher rental demand, the agency said.
The prices for groceries, however, rose at a slower pace in April than in March, helped by smaller price increases for fresh vegetables and coffee and tea, Statscan said. Excluding food and energy, prices rose 4.4% compared with a rise of 4.5% in March.
The average of two of the Bank of Canada’s (BoC) core measures of underlying inflation, CPI-median and CPI-trim, came in at 4.2% compared with 4.5% in March.
The month-over-month inflation rate was driven by gasoline prices, which posted the largest monthly increase since October, following an announcement from OPEC+ to cut oil output, Statscan said.
The Canadian dollar was trading 0.3% higher at 1.3430 to the greenback, or 74.46 U.S. cents.
