Canada's April inflation rate was faster than expected at 6.8% on gasoline and housing, putting more pressure on the central bank for another big rate increase on June 1 following its 50bp hike last month.
The consumer price index quickened from March's 6.7% pace, which some economists predicted would be repeated today in a sign inflation was peaking. Statistics Canada said Wednesday inflation quickened on a 36% rise in gasoline and a 13% rise in a measure of housing costs. Automobile prices were also factor with a 7.5% rise, and the agency said it will add a new index for used cars in the next release. That move is a nod to U.S. evidence that a global shortage of microchips for new cars during the pandemic has pushed Canada's true inflation rate even higher.
Price gains are now just below the 6.9% mark set in 1991 when the Bank of Canada adopted inflation targets, and the next benchmark goes back to 1983 when it reached 7.3%. BOC Deputy Toni Gravelle recently said policy makers will again be raising near-term inflation forecasts after March's CPI report, and today's figures suggest the view of a Q2 average of 5.8% is indeed out of date. Investors predict the Bank will hike the 1% policy rate by 50bp at the next meeting, and Governor Tiff Macklem has said going faster would be very unusual.