MNI: Canada CPI Rise Is Broader Than End Of Sales Tax Break
MNI (OTTAWA) - Canada's headline inflation quickened in February as a sales tax holiday ended but so did core measures excluding that policy change, suggesting the central bank faces a bigger trade-off in any further interest-rate cuts to help the economy adjust to the U.S. trade war.
Consumer price inflation quickened to 2.6% from January's 1.9%, Statistics Canada said Tuesday, and prices jumped 1.1% on a month-over-month basis. MNI consensus was for a year-over-year pace of 2.3% and a monthly reading of 0.6%.
The "trim" core rate of inflation was the fastest since last June at 2.9%, gaining from 2.7% in January and 2.5% in December. The "median" core index also quickened two notches to 2.9%, the quickest since October. Economists predicted both core rates at 2.8%.
While Bank of Canada officials say that in a time of volatility they are looking beyond their preferred core measures, at their last decision they said they will be cautious about further easing following a string of rate cuts since June as they weight the impact of higher prices from tariffs against damage to output and confidence. Prolonged tariffs could stall economic growth for two years and there's a risk one-time price gains become persistent inflation, central bank staff have said. (See MNI INTERVIEW: BOC To Cut More, Wary Of Inflation- Ex Staffer)
Inflation was broad-based in February even as the end of a two-month sales tax holiday on the 15th triggered a shift in prices for exempted items like restaurant meals, the federal statistics office said. It was the first time inflation has been above the BOC's 2% inflation target since October.
Housing remains a major source of inflation, with rents up 9% from a year earlier and mortgage interest costs up 5.8%. Car insurance premiums rose 7.5%.
StatsCan said future inflation reports won't need to adjust for any price increases related to tariffs as these will already be reflected in the data they collect.
In a separate report, the agency said job vacancies were little changed in the fourth quarter after nine previous declines. That kind of slowdown in the labor market is another reason the BOC has been cutting interest rates.