Canada’s Core Inflation Jumps 2.1%

Canada’s core inflation rate rose 2.1 percent in February compared to 2 percent the previous month. The rate of increase beat earlier predictions of 1.7 percent and is the fastest advancement since the month of December, 2008.

The result is especially interesting as the Bank of Canada has a growth target of 2 percent. Earlier in the year, the Bank predicted that that the annual rate of growth would not reach 2 percent until the third quarter of the year. Based on this assessment, Bank of Canada Governor Mark Carney had pledged to maintain interest rates at a record low 0.25 percent unless changes in the inflation rate warranted action earlier. Could the results of the past two months warrant an increase to interest rates earlier than previously expected?

David Watt, senior currency strategist at RBC Capital thinks it is possible.

“Inflation has been much stickier than the Bank of Canada anticipated and the economy is starting to roll. Overall, the Bank of Canada has no flexibility left and would be justified in highlighting the risk of an early move.”

Source: Bloomberg

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