MNI DATA IMPACT: Canada Feb CPI +1.1% Before Gasoline Surge

Canada's annual inflation rate ticked up to 1.1% in February from 1% in January, likely the last report before a surge in gasoline prices the central bank sees lifting the CPI to around 3%.

Consumer prices rose 0.5% on a monthly basis, Statistics Canada said Wednesday. Economists predicted inflation of 0.6% on the month and 1.2% from a year earlier.

The Bank of Canada last week boosted its inflation forecast while saying the gains won't last because it's a mechanical boost in year-over-year comparisons to 2020 when gasoline prices plunged. This is the only CPI report policy makers get before their critical April 21 policy decision where some investors say a strengthening economy will lead the central bank to taper QE asset purchases.

While gasoline prices rose 5% on an annual basis, the first such gain since last February, it didn't make much of a difference against declines in clothing, mortgage interest costs and telephone services. Excluding gasoline, inflation slowed to 1% from 1.3%.

Inflation has lagged the BOC's 2% target for a year now. The central bank says inflation won't consistently hold at the target until 2023, a major reason policy makers plan to hold their key interest rate at 0.25% until then.

The average of the three core inflation rates tracked by the BOC was unchanged at 1.7% in February. Markets doubt the numbers after StatsCan last month revised the figures then canceled those changes following complaints.

The February report also added more data on resale home prices, which should better reflect the surge in that market. The cost of new dwellings pushed up an index of homeownership costs by 7%, the most since 2007.