Canada annual inflation rate slows to 5.9% in January

CANADA’S annual inflation rate eased more than expected to 5.9 per cent in January due to a so-called base-year effect, even as food and mortgage interest costs continued to soar, Statistics Canada data showed on Tuesday (Feb 21).

Analysts polled by Reuters had expected annual inflation to edge down to 6.1 per cent from 6.3 per cent in December. Month over month, the consumer price index was up 0.5 per cent, again lower than analysts’ forecast of a 0.7 per cent gain after a 0.6 per cent decline in December.

Statscan noted that the annual rate was impacted by downward pressure from the base-year effect of January 2022, when prices had risen amid Russia-Ukraine tensions as well as supply chain disruptions.

The Bank of Canada has raised its benchmark interest rate to a 15-year high of 4.50 per cent to bring inflation down to its target of 2 per cent and said it would hold off on further increases as long as prices eased as forecast.

The bank forecasts inflation to slow to about 3 per cent by the middle of 2023, and to come down to its 2 per cent target next year.

Excluding food and energy, prices rose 4.9 per cent compared with a rise of 5.3 per cent in December.

Mortgage interest costs rose 21.2 per cent annually in January, the largest increase since 1982, while food prices rose 10.4 per cent, slightly faster than the 10.1 per cent in December.

The average of two of the central bank’s core measures of underlying inflation, CPI-median and CPI-trim, came in at 5.1 per cent compared with 5.3 per cent in December.

The Canadian dollar was trading 0.2 per cent lower at 1.3480 per US dollar, or 74.18 US cents, after the inflation data. REUTERS