February inflation rises to 1.4%
Canada's annual inflation rate rose in February to 1.4 per cent from the 1.1 per cent rate seen in January, Statistics Canada reported Thursday.
Economists had been looking for 12-month inflation to cool a bit to one per cent for February.
Higher prices for food and shelter were the primary reasons for the increase, Statistics Canada said.
Food prices increased 7.4 per cent during the 12-month period to February, following a 7.3 per cent increase in January. The main contributors to the overall jump in food costs were a 25.8 per cent hike in the price of fresh vegetables, a 9.7 per cent rise in the price of bakery and cereal products, and a 6.1 per cent increase in meat prices.
Shelter costs, the second-largest factor, increased 3.0 per cent, which was slightly less than the 3.3 per cent rise in January.
Holding inflation back was a year-over-year decline in the price Canadians were paying at the gasoline pumps. Gasoline prices in February were 19.7 per cent below levels in February last year.
Excluding gasoline, the annual inflation rate rose 2.5 per cent in the 12 months to February.
The Bank of Canada's core inflation rate — which factors out many volatile influences and is used by the central bank for the purpose of setting monetary policy, such as lending rates — advanced 1.9 per cent over the 12 months to February, identical to the increase posted in January.
Deflation not a risk
"This result shows that deflation remains a remote risk in Canada at this point, especially with the Canadian dollar adding pressure to some import costs," said BMO Capital Markets economist Douglas Porter.
"Even so, inflation remains below the [Bank of Canada's] two per cent target and is expected to head lower in the months ahead as the weak economy bears down more heavily on pricing power."
Porter said the inflation outlook "is likely mild enough — especially if the [Canadian dollar] extends its recent rebound —to allow the [Bank of Canada] to also dabble in quantitative easing, following the [Federal Reserve’s] lead."
With the key overnight lending rate already cut to 0.5 per cent, the Bank of Canada has said it will lay out its plans for quantitative easing shortly. That could see the central bank try to push down interest rates on government debt by printing money to buy bonds.