MNI:Canada Jan CPI Quickens As Gasoline Lift Beats Tax Break
MNI (OTTAWA) - Canada's headline and core inflation rates quickened in January with the lift from mortgage costs and gasoline exerting more influence than a federal tax holiday, and the last such report before the central bank's March 12 rate decision suggests less need to cut borrowing costs for a seventh time.
Statistics Canada's consumer price index climbed 1.9% from a year earlier compared with the December figure of 1.8%. The core "trim" index quickened to 2.7% from 2.5% and the "median" index rose a notch to 2.7%. The core indexes strip out the effect of the federal government's elimination in part of December and across January of the 7% sales tax that was also mirrored by some provincial governments.
Gasoline inflation quickened to 8.6% in January from 3.5% in December, in part because of the end of a gasoline tax holiday in the province of Manitoba. Excluding gasoline inflation was 1.7% and excluding food and energy it was 2.2%.
Natural gas prices swung to a 4.8% increase from a 5.5% decline in December. Even though housing costs have been slowing as the Bank of Canada began cutting interest rates in June, they remain an upward pressure on CPI. Mortgage costs climbed 10%, and both rents and property taxes by about 6%.
StatsCan estimates inflation excluding the tax holiday would have been 2.7%. Restaurant meal prices did fall a record 5.1% because of the tax break.
The report may add more weight to the minority of economists who saw the Bank of Canada halting its rate cuts at the next meeting on March 12 based on a growing economy and inflation appearing to become a bit sticky as in the U.S. Overshadowing the outlook is the potential for a trade war with the U.S., which officials have said would devastate exports and put some upward pressure on prices.
The Bank had said it would look through any temporary inflation dip linked to the two-month sales tax holiday and focus instead on trend measures such as core rates.