Canada’s annual inflation rate ticked up again in April, official data showed May 18, exceeding analyst expectations and upping the pressure on the central bank to raise interest rates to keep price expectations in check.
Headline inflation hit 6.8 per cent in April, just beating analyst forecasts that the annual rate would stay flat at 6.7 per cent and edging closer to the 6.9 per cent hit in January 1991, Statistics Canada (StatCan) data showed. It was the 13th consecutive month above the Bank of Canada’s one to three per cent control range.
Read Also
Mazergroup’s Bob Mazer dies
Mazergroup’s Bob Mazer, who helped grow his family’s company into a string of farm equipment dealerships and the main dealer for New Holland machinery in Saskatchewan and Manitoba, died July 6 from cancer.
“We were expecting inflation to have marked the peak in March and that didn’t happen,” said Jimmy Jean, chief economist at Desjardins Group.
“When you look at the core measures, you see a pretty strong pickup. So that’s a cause for concern for the Bank of Canada,” he added, noting that the bank needs to ensure that price pressures do not morph into an ‘inflationary spiral.’”
All core measures of inflation rose, including the closely watched CPI Common, which was up 3.2 per cent from an upwardly revised three per cent in March and above a forecast of 2.9 per cent.
Bank of Canada deputy governor Toni Gravelle last week acknowledged that the policy rate, at one per cent, was “too stimulative” and reiterated that interest rates need to be higher.
The central bank is widely expected to make a second 50-basis-point increase when it makes its next decision on June 1 and money markets are betting that the policy rate will be around three per cent by year-end.
“It’s kind of a fine line the Bank of Canada needs to go by… because the trick is to try to get inflation down without creating a lot of havoc. But that’s easier said than done,” said Darcy Briggs, a portfolio manager at Franklin Templeton Canada.
British inflation also surged in April, hitting a 40-year high, highlighting the global nature of price surges amid geopolitical conflict and continued supply chain disruptions.
Food price pinch
Grocery prices rose 9.7 per cent in April, the largest increase since September 1981, with consumers paying more for nearly everything at the store, said StatCan. Prices for starchy staple foods like pasta and bread led gains.
“Russia’s invasion of Ukraine in late February put upward price pressure on food products that use wheat,” StatCan said.
Shelter prices in April rose at their fastest annual pace since June 1983, while gasoline prices fell slightly from March to April. Still, consumers paid 36.3 per cent more at the pump for gasoline in April compared with a year ago.
“This is the relative calm before another downpour in next month’s report, as gasoline prices are tracking a double-digit increase for May alone,” Doug Porter, chief economist at BMO Economist, said in a note.
StatCan, which will change how it tracks used car prices, starting with its release next month, said in a separate paper that March’s headline rate would have been 6.9 per cent instead of 6.7 per cent, had the new methodology been in place at the last basket update.
