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MNI (Ottawa)

Canadian consumer prices climbed 4.4% in September from a year ago, the fastest since 2003 and the sixth month beyond the top of the central bank's 1%-3% tolerance band, with gains in every major category led by housing and base effects around last year's plunge in gasoline prices.

The gain was stronger than the 4.3% market consensus and followed August's 4.1% pace. Statistics Canada's report Wednesday also showed prices grew 0.2% on a one-month basis, versus the expected 0.1% increase. The Bank of Canada's three core price measures averaged 2.7% from a year earlier, the highest since 2008.

The CPI is the second report this week showing big price gains following a BOC survey Monday where nearly half of firms saw inflation of more than 3% over the next two years. Governor Tiff Macklem last week told reporters inflation is still linked to a narrow suite of products and should subside after hiccups linked to the economy reopening.

The BOC has a rate decision Oct. 27 and economists see a taper of bond purchases to a pace that stabilizes its balance sheet, with no change in the 0.25% lending rate. Macklem has said the low rate will remain in place until the second half of 2022 and inflation is consistently on target and potential output restored. The economy still faces downward price risks from GDP shrinking in the second quarter, elevated unemployment, and high Covid counts in western Canada.

Inflation averaged 4.1% in the third quarter, faster than the the BOC's July projection for 3.9%, and the Bank sees price gains moderating to 3.5% in the fourth quarter.

MNI Ottawa Bureau | +1 613-314-9647 |
MNI Ottawa Bureau | +1 613-314-9647 |