Canada Inflation Accelerates to Fastest Pace in Three Years

Canadian  inflation picked up more than analysts expected in February to the fastest pace in more than three years as signs point to price pressures continuing to build.

Consumer prices accelerated to an annual pace of 2.2 percent in February from 1.7 percent a month earlier, the fastest pace since 2014, Statistics Canada said Friday from Ottawa. Economists had anticipated a 1.9 percent increase. Core prices – – which exclude more volatile items like energy and are considered a gauge of inflation pressures — inched higher for a fifth month to 2.03 percent, which is the fastest since 2012.

Faster-than-expected inflation could add pressure on the Bank of Canada — which has kept the expansion going with low interest rates — to keep hiking borrowing costs to more normal levels. Inflation running close to the central bank’s 2 percent target suggests an economy operating near capacity.

Investors are anticipating at least two more increases this year, after the Bank of Canada hiked borrowing costs three times since July.

The Bank of Canada expects inflation will stay at about 2 percent on average over the next two years.

Statistics Canada cited higher prices for gasoline, cars, and mortgage interest costs as main contributors to annual inflation. The minimum wage increases in Ontario also seem to have had an impact, with food purchased from restaurants pushing up nationwide prices by 4 percent from a year ago.

Highlights of CPI Report

The average of the Bank of Canada’s three key core inflation measures rose to 2.03%. That’s the highest since a 2.1% rate in February 2012. The average had last hit the 2% threshold in June 2016. All three so-called core measures accelerated. The “common” core increased to 1.9% from 1.8%. The “median” core rate rose to 2.1% from 1.9%. The “trim” measure was up to 2.1% from 1.8%. Inflation for services was 2.6% in February, the highest since September 2011. Goods inflation was 1.7% On a monthly basis, overall prices were up 0.6%, versus economist expectations for 0.4% Seasonally adjusted, consumer prices nationally were up 0.2% in February