Last month’s higher gasoline and food prices caused another Canadian inflation increase. Nevertheless, the hike was not big enough for the Bank of Canada (BoC) to start thinking about interest rate increase. The central bank still keeps its benchmark rate at the historically low level.
According to Statistics Canada, the annual inflation rose to 2.6% in February. It’s 0.1% higher than in January, but still below 2.7%, expected by analysts.
Meanwhile, the core inflation, excluding gasoline and certain food prices, turned out to be a bit higher than anticipated: instead of the expected 2.2% the inflation hit 2.3% level.
“It should be noted that such results were a bit higher than the BoC expected,” – said Doug Porter, deputy chief economist at BMO Capital Markets.
“In the same time, I don’t think such numbers could be enough for the central bank to start acting. Although now it’s more probable that rates may start rising sooner rather than later,”- he added.
As you know, the Bank of Canada target inflation rate is 2% with a control range of 1%-3%. Earlier the Bank of Canada already noted that inflation increase was somehow firmer than expected. It means the Bank may have to start raising its key interest rate in time.
But with the global financial crisis hitting the world markets, the central bank decided to ignore certain temporary inflation hikes, taking into consideration additional economic pressures from other countries.
Today some economists suggest that the Bank of Canada may change its decision, especially, with the U.S. getting more stabilized and Europe showing progress in solving its debt crisis.