MNI: Canada Inflation Quickens For 1st Time In 10M, Core Slows

Canadian inflation quickened in April for the first time in 10 months as higher mortgage interest and rent costs outweighed lower gasoline prices, and while core CPI slowed the report puts focus on the central bank's warning it will raise interest rates again if prices become sticky. 

Consumer prices rose 4.4% from a year ago, faster than the market consensus inflation would slow to 4.1% from March's 4.3%. Statistics Canada also said Tuesday prices rose 0.7% in April from March, also beating the 0.5% forecast.

Two core rates the Bank of Canada focuses on faded to the slowest in about a year. The median index declined to 4.2% from 4.5% and the trim index to 4.2% from 4.4%. The central bank sets interest rates to bring inflation to 2% and all of those figures are well outside its 1% to 3% tolerance band.

Mortgage interest costs rose a record 28.5% from a year ago, reflecting the BOC's eight hikes through January from 0.25% to 4.5%. Governor Tiff Macklem paused at his last two meetings and said there is danger inflation gets stuck above target. The next decision is June 7 and this is the last CPI report before then. 

Inflation also quickened as rents climbed 6.1%, automobiles by 4.1% and restaurant meals by 6.4%. While gasoline prices fell 7.7% from a year ago, the recent OPEC production cut and Canada's carbon tax boosted them 6.3% in April, a lift that could continue in the next few months.  

At a time when the Bank is worried about embedded inflation expectations, grocery prices that have drawn major public attention remain uncomfortably high, gaining 9.1% in April versus 9.7% in March. That's about double the pace of recent elevated wage gains. 

Most firms see inflation running much faster than 2% until at least 2025, the Bank reported April 3, and a separate survey showed households saw 6% inflation a year from now.

Some other recent reports on housing, jobs and output suggest the economy isn’t being slowed that much by the Bank of Canada’s rate hikes.

Faster April inflation also challenges the Bank's forecast that CPI will average 3.3% in the second quarter and reach 3% around midyear.

Consumer prices have slowed from June’s four-decade high of 8.1%, though price gains have already topped the 2% target since March of 2021.